Above: the Westin Dawn Beach St Maarten, home of this year’s STEP conference
By Joshua Martinez
ST MAARTEN — The annual Society of Trust and Estate Practitioners’ (STEP) Annual Caribbean Conference brings together companies, attorneys, and individuals in key market sectors such as Company Incorporations, Trusts, Funds, Foundations, and Captive Insurance to discuss the role of the Caribbean as an international financial centre. We took some time at this year’s STEP conference in St Maarten to get the take of Carlyle Rogers’, this year’s chairman, on the future of Caribbean Financial Services.
How would you describe financial services in the Caribbean right now?
If one starts with the issue of banking, then this is an area which is experiencing some challenges. From Jamaica in the north and west straight to the east through Anguilla and then down to Trinidad and Guyana in the south, banking is experiencing some consolidation as the larger banks, especially the Canadian ones, are taking some heavy losses and thus reducing staff and their footprint in the region.
In terms of the Eastern Caribbean Currency Union, again we are seeing banks take write-downs on their balance-sheets due to poor loan performance which is causing liquidity problems. The Eastern Caribbean Central Bank has had to intervene to take control of two domestic indigenous banks in Anguilla and one in Antigua and watching briefs are being done on the entire sector. The Monetary Council of the Central Bank has recently proposed changes to the Union’s banking legislation and other measures to shore up governance of the banks for which it has regulatory responsibility.
In terms of the offshore sector which encompasses offshore banking and a myriad of sectors, it is strong, but is in flux and under strenuous pressures designed in my view to close it down by the developed countries for sheer political reasons. There are discussions regarding introducing registers of beneficial ownership information for companies and trusts domiciled in the UK Overseas Territories along with the increasing rules for customer due diligence to fight, ostensibly, money laundering and terrorist financing, which are driving up the cost of doing business.
What is the importance of the STEPCC conference?
We assembled in this part of the North-Eastern Caribbean at a time of dynamic flux in the global economy, during which seminal questions are being asked of the future of free-market capitalism, the role of international financial centres and the moral and ethical questions surrounding wealth creation and distribution. It is therefore interesting that we should meet in this part of the world, whose modern existence commencing in the 15th and 16th centuries with colonization, was driven by the desires of Europeans of those past periods to increase wealth through geographical expansion, encompassing physical and natural resources as well as peoples. As capitalism was changing then, so too it seems, it is changing now.
It is my hope that during this conference, delegates and speakers gained a much better and deeper understanding of the issues, which our jurisdictions face and the external forces which buffer our existence.
What is the future of the Caribbean as a financial services hub?
As long as the region maintains elements of tax neutrality and the structures which we have, there will be a semblance of a financial services industry here. However, whether or not, the region will continue to exist in the face of the unrelenting pressures from the UK on its Caribbean Overseas Territories and the EU/OECD/FATF and US on both those and the independent countries . . . Yes, it is likely to exist to some extent but perhaps not in the form that we know today. I can see more consolidation in all sectors as enumerated above in banking, trustee companies etc. I can see also more specialized business and newer structures and services which give more substance to the operations within the region.
The financial services sector will move or will have to move away from opaqueness and to a lesser extent tax arbitrage for passive income and instead focus more on active business taking place from within the geographical confines of the region with physical space, employees and economic activity being generated locally. It is what I have termed: “Substance over form.”
There is a future for the Caribbean as a financial services hub but it will be a different future from what we see now.”
There is a future for the Caribbean as a financial services hub but it will be a different future from what we see now. Persons wishing to make use of the region will likely have to domicile themselves and their capital within the region and not just use it as a conduit. In my view, that, despite the short-term pain which the region is feeling now, is better in the long run. We have to move away from just being a centre which is a conduit to being centres where decision-makers live, work, come up with ideas and base their operations and grow their businesses accordingly.
Is there a future where the Caribbean financial services sector does not play second fiddle to tourism?
In some jurisdictions, the financial services sector does not play second fiddle to tourism. In fact, in the three most well-known Caribbean financial services centres, i.e. Bermuda, Cayman Island and the British Virgin Islands, it clearly does not. It does in the smaller and newer centres like Anguilla, Nevis, St. Lucia, Belize and others. Now, can this change in these centres, The likely answer at this stage is no, but one never knows what the future holds. These jurisdictions are indeed interested in developing it but in the current context, we know the challenges that they face. However, it is not an issue of replacing tourism with financial services so that the latter does not play second fiddle to the former. The ideal scenario is that in those jurisdictions where the sector is not developed, that it be so developed to provide the necessary counterweight to tourism as a driver of economic growth and development. That is what we should be striving to achieve.