I must declare an interest. As part of my regular timetable of training visits, I go to Guernsey about five times a year, for a week at a time. And I like it very much: I like the scenery, I like the size and structure of Town (as the capital, St Peter Port, is termed), and I like the local attitude to AML and their distaste for financial crime in general, including tax evasion. (Although you should bear in mind that the MLROs that I meet are the self-selecting dedicated ones; if an MLRO is not bovvered about AML, he’s not going to bring me in to train his staff or edit his AML manual.) So I was nearly as surprised and upset as the Guerns when, in the middle of June, Guernsey was placed on the EU’s list of thirty jurisdictions that are considered non-cooperative in tax matters – tax havens, for short. To get on the list, you had to be “nominated” (i.e. fingered) by at least ten EU Member States, and it turns out that Guernsey’s tenth nomination – by Poland – was actually a nomination for Sark. It’s an easy mistake for those who have never experienced first-hand the fierce loyalty of Channel Islanders to their own particular island. Although Sark is located geographically within the Bailiwick of Guernsey, it is fiscally entirely separate: it has its own laws, its own parliament, and even its own UN country code (680). So if Poland is unhappy with the tax regime of Sark, that’s no reflection on Guernsey.
But the damage was done to Guernsey. Danders were up in Town, and representations were made to the EU, whose spokeswoman Vanessa Mick admitted at the beginning of July that “it appears there were different criteria for different countries so we are trying to co-ordinate that [by inviting] the countries on the list of thirty to engage in talks with the objective of updating the list by the end of the year.” That’s quite a while to wait for a de-listing, so Guernsey has contacted friends in other high places, and in a press release yesterday Guernsey Finance (“a joint industry and Government initiative to defend and promote the long term reputation, stability and development of Guernsey as an international centre of excellence for financial services”) announced that the OECD had come out in its defence, saying lovely things like “we are very pleased with the cooperation Guernsey has shown as a very active member of the Global Forum on Transparency and Exchange of Information for Tax Purposes” and “Guernsey is in the leading group of jurisdictions who are active in the practical implementation of tax transparency and co-operation”.
It all seems very harsh on Guernsey, and I certainly don’t want to make capital out of someone else’s misfortune, but it is a timely reminder for us that one of the main risks of not doing AML properly is reputational damage – whether personal, institutional or jurisdictional. This example – albeit tax-related and ultimately wrong – shows how quickly a hard-earned reputation can be tarnished (we hope temporarily in this case). And if accusations are levied, it is the documented evidence of your good standing and best efforts (here Guernsey can point to its legislation, its codes of practice and its many Tax Information Exchange Agreements and Double Taxation Agreements) that will come to your rescue. Fulsome file notes, ladies and gentlemen – good records, certified copies, and fulsome file notes.