Panama Papers leak will have impact on expat banking options

Panama Papers leak will have impact on expat banking options

Published in The Telegraph – 18th April 2016

Relatively few UK expats may be directly caught up in the scandal of the Panama Papers, leaked from Panamanian law firm Mossack Fonseca, which revealed how the rich and powerful use tax havens to hide their wealth.

However, many of them could be affected if the knock-on effect is a clampdown on all offshore centres. Such centres, which include the Channel Islands and Isle of Man, offer savings accounts to expats who want to put their money with familiar UK banks but can’t use those onshore because they don’t live in the UK. They also offer investments and insurance tailored for expats.

Howard Bilton, chairman of the Sovereign Group, which specialises in offshore trusts, said: “The banks in the main offshore centres are extremely nervous of taking on any clients who are not resident in their jurisdiction. That was the case prior to the Panama Papers but these latest revelations will make it even harder for expats.”

Already, the number of banks in the traditional offshore centres offering savings accounts for expats has fallen thanks to increased regulatory costs making it an unattractive business for the parent company. Add on years of low interest rates, and it’s understandable why many have shut up shop.

Justin Harris, managing director of international financial advisers Chase Belgrave, commented: “It is vitally important that we do not allow the hysteria surrounding the recent allegations to adversely cloud our view of legitimate and prudent tax planning by expats. What remains to be seen is the impact this will have on regulations in the future.

“It would be a great shame if people living and working offshore were penalised and found it more difficult to access banking and investment services compared with their onshore counterparts.”

Mr Bilton added: “It is all very well saying that expats could hold their money in accounts where they live but there may be many reasons why an expat would prefer to bank elsewhere – stability; English law; familiarity; range of services and products and currencies.

“There could be any number of legitimate reasons for holding money offshore. The centres usually used by UK expats – the Isle of Man, the Channel Islands – are very respectable and well regulated. Just because an expat is banking offshore does not mean that the UK taxpayer is losing out or that the expat is doing anything legally or morally wrong.”

Richard Hay, counsel to the IFC (international financial centres) Forum, which represents law and accounting firms in British Crown Dependencies and overseas territories including the Channel Islands and Isle of Man said: “It is wrong to bracket all small financial centres together as so-called secrecy jurisdictions. British IFC regulatory standards, including on tracking of beneficial ownership, are judged in peer reviews and authoritative academic studies to be among the best in the world.”

While the Mossack Fonseca affair might have a knock-on effect on UK expats, Mr Bilton says that it has simply speeded up something that was due to happen anyway. By 2018 the Common Reporting Standard should be in place in most countries.

Mr Bilton said: “This will require all financial institutions, including banks and offshore service providers, to exchange information about anybody and everybody who does business with them who is not resident in their own jurisdiction.”

The CRS reporting obligations will create additional costs for the bank, which they will almost certainly pass on to the customer, according to Mr Bilton. The worst case scenario is that banks will decide to stop providing services for non-residents.

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