Wednesday, March 11, 2009

A shift has occured!

A timely non induced financial services industry shift has been made. The LGT Group, Liechtenstein's largest bank, was reported in the Wall Street Journal, in their online edition dated March 11th, 2009 that it will quit and subsequently, sell, it's trust business for wealthy individuals.

This is a huge development in regards to offshore trust companies/countries and, the impending dangers that the Organization for Economic Co-operation and Development (OECD) and the new Obama administration present in regards to their business.

The reason why this development is so distinctive, is because it represents a first move from the private industry, with little or no direct and cosequential badgering by any larger group or organization. LGT, made the move on their own. Perhaps behind the scenes talks about what is to come, made them move at this time. But, certainly, rhetoric and with that rhetoric, the sharp negotiations in the open as well as policy dialouges, were not accompanying this sudden change in strategy by the LGT group.

Liechtenstein has been on almost every advisory/black list in regards to offshore tax evasion. It has been a continual target by the OECD and the EU in regards to its trust practices.

However, the move by this European country--with royal ties-- and a country that has, up until now, evaded any major sanctions against its offshore business due to its geography and ties to the wealthy European establishment, should be an indicator that the ride on trust companies is over. And, secondly, we should as a region that support offshore trust businesses, begin to change our strategies. This should also signify that there is little room or tolerance for lobbying against any new threat against the industry, world wide and from anyone.

In a sense, the handwriting is on the wall. And, all of the aggression by the US congress up to this date--led by Sen. Carl Levin and, President Obama when he was in the senate-- is about to meet a head and there is very little we can do about that.

What is there to do when financial services is a second pillar to many a Caribbean economy?

Mainly for economies like Barbados and the Bahamas, trust companies, which comprises a healthy proportion of its financial services sector, it is a time to diversify radcially. On the other hand, countries like the United Kingdom protectorates--Bermuda and the Cayman Islands-- it too is a time to diversify, but it should not be a cause for grave concern as they are still tied to a major economy. So, they [UK protectorates] have, if not already and if only by their relationship with the UK, buffered themselves in regards to mitigating any negative impact on their GDP and Real GDP figures and more importantly, the impending loss in revenue's and jobs.

In any event, I see opportunity in these struggling times for the Caribbean financial services sector. Least of which is supported by the fact that we have a black man as the president of the United States of America. What this should do-- as it has done for black Americans-- is give a boost of confidence to the black Caribbean world in regards to them implementing some strong and, much needed, indigenous self preservative economic polices, which should not be rejected totally out of hand, when in the face of world advisory bodies like the OECD, the World Bank and the International Monetary Fund.

I also see opportunities in regards to re-defining our financial services model, allowing for more innovation and, more importantly, shifting our tax thresholds and our varying International Business Company packages, to meet this new demand to give new and improved benefits and service to our clients.

Tax or no tax; there will always be a market for affordable cash storage--especially in light of the LGT group 'selling' it's offshore trust business. Also, with the many over-reaching mandates from the world super powers have been on many occasions, they always go too far and reach too deep and always end up doing more damage than before. What normally happens is that businesses, always find a way around greater and, in some cases, loosely regulated but unfair taxation.

What can happen is that companies, will begin to incorporate (hopefully in the Caribbean) in low tax jurisdictions and move away from larger industrialized nations for good.

With the global span of multinational corporations, this is not a far fetched idea. A prime and recent example of this--outside of the many companies that migrated to Latin America and Canada-- is with and when the Sarbanes Oxley (SOX) act on corporate governance and better accounting standards, passed in the US congress. The UK, saw a surprising rise in companies moving to their jurisdiction. The evidence on this, as seen through the eyes of many analysts, is in the rise in the listing of foreign companies in the UK's Alternative Market, primarily. Small and medium sized companies, took advantage of the opportunities the UK granted to companies--with high corporate taxes, included.

While it can be said that SOX, improved accountability in US corporations. However, with the recent financial crisis with the collapse in accounting and risk standards as well as moral standards of Wall Street financiers, the merits of SOX seems overshadowed. Also, it can also be said conversely that the UK, offers allot more than any suggested lower corporate governance structures and 'negotiable' tax structures.

Ultimately, this is not a time for fear. But, this is a time to think. And, then, put meaningful action into our pooled reserves of ideas, to impact the majority for better opportunities for the majority.
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