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Private bank customers get digital as tax disclosure becomes automatic
The British overseas territory’s private banking sector goes back more than 160 years and today is developing new areas of operation, writes Ray Spencer in the second part of a report on Gibraltar banking
fully-fledged bank, adapting to the ever changing regulatory market”, he explains. With most clients being local or from the UK, he points to the bank’s “ability to constantly re-evaluate the world around us and create fresh perspectives”, a philosophy emphasised in its latest ‘Rethink Everything’ branding campaign.
The introduction of automatic exchange of tax information from this summer with more than 50 other jurisdictions as part of Common Reporting Standard (CRS), adds “a new dimension to the on-boarding process for new clients, and has placed an additional administrative burden on banks to report on impacted clients accurately and in a timely fashion”, Caetano points out.
Serious offence
More than 100 jurisdictions have committed to the swift implementation of the CRS and in 2018-19, CRS extends to much of the rest of the world! Automatic exchange of information involves the systematic and annual transmission of “bulk” taxpayer information by the source jurisdiction to the residence jurisdiction of the taxpayer.
As James Tipping, director of Gibraltar Government’s Finance Centre, points out: “Since January 2011 tax evasion has been a serious criminal and indictable offence with possible imprisonment of up to seven years, which was then a starting-gun for financial services firms to review their client lists and, if they had any doubt about the origin of money they handle, they need to have reported it.
“Thus, it is an offence not to report any suspicion as it could relate to money laundering as well as tax evasion.” It is a particular issue for banks generally, but particularly so for private banks.
For two years, the US FATCA (Foreign Account Tax Compliance Act) has meant banks provide information on US customer accounts, to which a UK-originated version was added last year for Crown Dependencies and Overseas Territories, and automatic exchange of information under the EU Directive on Administrative Co-operation for member States comes into effect in September.
Key has been the adoption of digital banking – albeit somewhat later than the retail banking side of business –
for private clients, a concept that seems to go against the image of close, even secretive, personal encounters with High Net Worth Individuals (HNWI).
The merger of S G Hambros with Kleinwort Benson (KB) last year by parent Société Générale, to create Kleinwort Hambros (KH) marked more than a change in name. “We are developing a digital banking strategy for private wealth management - delivering a service through on-line advice,” new chief executive Eric Barnet, declared.
He was introducing the rebranded business to journalists in Gibraltar, where it has had operations since 1981 having bought Crédit Agricole in 2003 and ABM Hambros in 2008 – “a track record of commitment to the jurisdiction, which I hope, and expect, to continue”, he said.
The KB part of his business was already ahead, but by end-2017 Barnett expects KH “to have introduced digital account handling, with a wider range of customer services to include Kleinwort investment skills at lower initial levels of entry – down from the present £75,000 general minimum threshold to around a couple of thousand pounds when people are investing - from pensions to ISAs, for example”.
The rationale is that on-line competition arises from tech start-ups that have no history of investment, whereas with KH “people will know that it is a business used to dealing with money, they will gain reassurance, and we can reach a wider range of clients and offer an additional layer of comfort”.
The Gibraltar operation is “profitable”, he told Gibraltar International, and growth in assets under management in recent years - at a rate of 5-10%pa – “has come from expanding the market with HNWIs locally and across the world, not from other players”.
A Swiss privately-owned Gibraltar bank and asset management firm, Turicum, was
established in 1993 by bankers, asset managers and lawyers from Geneva and Zurich, (where it has a representative office), and since January has offered internet access to accounts, check balances, make transfers and contact individual relationship managers.
Chief executive, Andreas Businger, relates: “It has been a major project, like driving a car whilst at the same time building and exchanging the motor, and a major challenge, but one that we – unlike some of the major private banks – have been able to
Kleinwort Hambros has “track record of commitment” to Gibraltar, says Group chief executive, eric Barnet
do.” Turicum says it does not depend on external financing and “in order to protect the Bank and our clients’ wealth we do not engage in any risky banking activities”, including corporate and investment banking services, mortgages or commercial loans.
Another Swiss-owned private bank, Lombard Odier & Cie, has operated in Gibraltar for 30 years and provides a private client investment and asset management service, plus technology and banking services. Peter Caetano, managing director of the local business since 2015, says the bank “has witnessed and undergone many changes in its time, most significantly the ability to cater for Gibraltar resident clients following the end of the tax-exempt regime in 2010.
“We went from a booking office to a
In addition, Gibraltar has circa 151 tax
Gibraltar International

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