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Panama Papers fallout may hit expat offshore accounts
| Published: | 19 Apr at 6 PM |
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Although only a few UK expats are likely to be caught up in the Panama Papers scandal, many more could be badly affected by the knock-on effect of offshore banks’ reactions.
Many offshore branches of high street banking names operate from financial centres such as the Channel Islands and the Isle of Man, serving UK expats now disallowed from using onshore banking facilities. Offshore centres also offer insurance and investments specifically targeted at expat needs.
Over the last few years, the numbers of expat-friendly offshore banks have fallen to an all-time low due to soaring regulatory costs, and the post-financial crisis slump in interest rates has resulted in clients preferring other investment options. Experts in the field are now attempting to predict the impact the Panama Papers will have on the offshore sector as a whole.
According to legal counsel to the International Financial Centres forum Richard Hay, it’s wrong to bracket all offshore centres as ‘secrecy jurisdictions’. The present regulatory standards for IFCs, he states, are considered by academic studies and peer reviews to be some of the most stringent in the world. Other financial experts are noting that the scandal has simply brought into focus and possibly speeded up the 2018 introduction of new regulatory rules.
The so-called Common Reporting Standard will compel offshore financial service companies and banks as well as all onshore providers to exchange information on all business and individual customers located overseas. Considering the increased costs of the new rules which will, no doubt, be passed on to unhappy customers, plus the increase in bureaucratic paperwork required, it’s quite possible that offshore banks will close their doors to non-resident expat clients.
Should this worst scenario become a reality, the only solution for UK expats would be the banking options in their country of residence, many of which might be considered unsuitable and risky as regards capital protection.
Many offshore branches of high street banking names operate from financial centres such as the Channel Islands and the Isle of Man, serving UK expats now disallowed from using onshore banking facilities. Offshore centres also offer insurance and investments specifically targeted at expat needs.
Over the last few years, the numbers of expat-friendly offshore banks have fallen to an all-time low due to soaring regulatory costs, and the post-financial crisis slump in interest rates has resulted in clients preferring other investment options. Experts in the field are now attempting to predict the impact the Panama Papers will have on the offshore sector as a whole.
According to legal counsel to the International Financial Centres forum Richard Hay, it’s wrong to bracket all offshore centres as ‘secrecy jurisdictions’. The present regulatory standards for IFCs, he states, are considered by academic studies and peer reviews to be some of the most stringent in the world. Other financial experts are noting that the scandal has simply brought into focus and possibly speeded up the 2018 introduction of new regulatory rules.
The so-called Common Reporting Standard will compel offshore financial service companies and banks as well as all onshore providers to exchange information on all business and individual customers located overseas. Considering the increased costs of the new rules which will, no doubt, be passed on to unhappy customers, plus the increase in bureaucratic paperwork required, it’s quite possible that offshore banks will close their doors to non-resident expat clients.
Should this worst scenario become a reality, the only solution for UK expats would be the banking options in their country of residence, many of which might be considered unsuitable and risky as regards capital protection.
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