Isle keen to paint a brighter pic­ture

Images of fi­nan­cial chi­canery at the Isle of Man are be­ing swept away, writes Lucy Bur­ton

The Sunday Telegraph - Money & Business - - Business -

Sto­ries and su­per­sti­tions seem to last gen­er­a­tions in the Isle of Man. Drive from the air­port to the cap­i­tal, Dou­glas, and you will pass a bridge in which you must greet the fairies or “lit­tle peo­ple” to avoid bad luck, while the sea fog that cir­cles the is­land is thought to be the an­cient sea god Manan­nán mac Lir’s protective cloak. There are also tales of ghostly black dogs, a talk­ing mon­goose called Gef and ma­li­cious fairies, which is­landers need to ward off.

But there are some sto­ries is­landers want to move on from, es­pe­cially as it faces a whole host of un­knowns as the UK pre­pares to leave the EU. Many are fear­ful about Brexit’s im­pact on the is­land’s econ­omy, which has been grow­ing for three con­sec­u­tive years, and are frus­trated that they didn’t get a chance to vote, given the is­land is not tech­ni­cally part of Bri­tain. Faced with a huge bucket of un­cer­tain­ties on top of an al­ready sig­nif­i­cant skills gap, the govern­ment has ramped up its push to at­tract more busi­nesses so that it is spruced up come March 2019.

“[Brexit] has added im­pe­tus, be­cause we’re wor­ried about our sup­ply be­ing cut off,” KPMG’S Micky Swin­dale, the for­mer pres­i­dent of the is­land’s cham­ber of com­merce, said of the re­cent mar­ket­ing push. “Once we get more clar­ity, we will work very quickly to cap­i­talise.”

Hav­ing trans­formed its econ­omy from one that was pre­dom­i­nantly based on agri­cul­ture, tourism and fish­ing, the is­land is now heav­ily re­liant on the fi­nan­cial ser­vices sec­tor – it is where many Bri­tish ex­pats hold sav­ings and in­vest­ments – and has close links with the City of Lon­don.

Con­ser­va­tive MP Mark Field once said in West­min­ster: “The UK and the Isle of Man ben­e­fit from each other’s suc­cess and it is in the in­ter­ests of the UK to see the Isle of Man do well.” This was ev­i­dent dur­ing the cri­sis, when the is­land pro­vided around $35bn in liq­uid­ity to the UK fi­nan­cial sys­tem, ac­cord­ing to ac­count­ing firm EY.

The is­land, which recorded $21.37bn of as­sets un­der man­age­ment in Septem­ber 2015, now em­ploys around 10,500 staff in its fi­nan­cial ser­vices sec­tor, one in four in­hab­i­tants who are in work. Fi­nan­cial ser­vices con­trib­utes

‘We put an ad­vert out in the UK, and half of the ap­pli­cants didn’t even know where the Isle of Man was’

over a third of GDP – around 15pc from in­sur­ance, 8pc from bank­ing, 10pc from other fi­nance ser­vices and 3pc from cor­po­rate ser­vice providers.

But its fresh pitch to the busi­ness com­mu­nity will first have to tackle an old tale – that it is a place where in­di­vid­u­als and com­pa­nies go to take part in fi­nan­cial ac­tiv­i­ties that re­ceive less scru­tiny than on the main­land – be­fore it gets to the bits about its in­trigu­ing his­tory, world fa­mous mo­tor­cy­cle race and sea view of­fices.

Al­though it tried to make this mes­sage clear four years ago – when Eddie Teare, Manx trea­sury min­is­ter at the time, wel­comed David Cameron’s com­ments that it is no longer fair to dump the Isle of Man with the tax haven la­bel – the fo­cus on fi­nan­cial crime has ac­cel­er­ated in the last year.

The ris­ing num­ber of investigations co­in­cides with a fresh push to do more to clamp down on fi­nan­cial crime. The govern­ment cre­ated a fi­nan­cial in­tel­li­gence unit aimed at tack­ling cor­rup­tion, money laun­der­ing and fi­nan­cial ter­ror­ism last year, and in Au­gust un­veiled a new fi­nan­cial crime strat­egy af­ter prob­lems were iden­ti­fied by Money­val, the coun­cil of Europe body. In its 190-page re­port pub­lished in Jan­uary, the or­gan­i­sa­tion said the is­land needs to be more proac­tive in spot­ting money-laun­der­ing cases and sus­pi­cions of ter­ror­ism fi­nance, with Howard Quayle, chief min­is­ter, re­spond­ing to the re­port by say­ing that “ad­dress­ing these points is a mat­ter of na­tional pri­or­ity”.

“Per­cep­tu­ally it’s very good,” said Steve Mc­gowan, the group chair­man of cor­po­rate ad­viser SMP Part­ners, re­fer­ring to the launch of the new in­tel­li­gence unit. “Ev­ery­thing in the last few years has been very good for our im­age. We are all in­ter­ested in com­bat­ing fi­nan­cial crime.”

In­deed, Mc­gowan said the crack­down has in­ten­si­fied each year since the fi­nan­cial cri­sis, with new steps or rules then fol­low­ing. He’d like to close his eyes for two years, he said, so that when he opens them he can see what im­pact new rules such as the Com­mon Re­port­ing Stan­dard – which will make the ex­change of fi­nan­cial in­for­ma­tion au­to­matic, mak­ing it harder to un­law­fully evade taxes – have had on the is­land’s rep­u­ta­tion.

“We will al­ways have peo­ple, be­cause of the low tax regime, who view the Isle of Man as harm­ful – but low tax is our USP. It doesn’t mean that should at­tract [il­le­gal ac­tiv­ity]. Why should we be lam­basted be­cause we have low tax­a­tion?”

But, for the fi­nan­cial ser­vices sec­tor, spruc­ing up its im­age is as much about find­ing new nar­ra­tives as it is about ban­ish­ing old ones. As those in the in­dus­try look to a fu­ture that will inevitably in­volve com­ply­ing to new rules, many are also hunt­ing for ways they can stay ahead of the curve and try to at­tract fresh ta­lent – a ma­jor is­sue on the is­land, and ar­guably even more so for those in fi­nance.

“We put an ad­vert out in the UK, and half of them [the ap­pli­cants] didn’t even know where the Isle of Man was,” said Daniel Scott, the co-founder of bit­coin ex­change Coin­corner.

While hir­ing chal­lenges re­main, Scott is among a grow­ing num­ber of en­trepreneurs set­ting up fi­nan­cial tech­nol­ogy com­pa­nies on the is­land, par­tic­u­larly in the bit­coin and dig­i­tal cur­rency space. Ea­ger to di­ver­sify from bank­ing and in­sur­ance, the govern­ment’s push in this space makes sense – the is­land al­ready has a boom­ing on­line gam­bling sec­tor that makes up around 20pc of its GDP, and a num­ber of cof­fee shops and taxi com­pa­nies started ac­cept­ing bit­coin pay­ments years ago.

The ben­e­fits of a small is­land also mean that cre­at­ing the right reg­u­la­tory en­vi­ron­ment can hap­pen quickly – as other mar­kets crack down on so-called coin sales, a way of rais­ing funds from the public us­ing a vir­tual coin, the Isle of Man is look­ing at cre­at­ing a friendly en­vi­ron­ment.

“I feel sorry for the per­son com­ing up with that reg­u­la­tion as it will be a fine line,” noted Scott, high­light­ing an is­sue the govern­ment will in­creas­ingly face as it works harder to at­tract new ar­eas of busi­ness while also be­ing care­ful to be seen as com­pli­ant.

But with rat­ings agency Moody’s say­ing that the big­gest chal­lenge fac­ing the is­land is Brexit-re­lated un­cer­tainty, key sec­tors such as fi­nan­cial ser­vices will need to make sure they are do­ing all they can to main­tain com­pet­i­tive ad­van­tage so that the is­land is at­trac­tive no mat­ter what is around the cor­ner.

‘Ev­ery­thing in the last few years has been very good for our im­age. We are all in­ter­ested in com­bat­ing fi­nan­cial crime’

The Isle of Man as seen in a vin­tage poster above, is open for busi­ness but no haven for com­pa­nies wish­ing to avoid strin­gent checks on fi­nan­cial ir­reg­u­lar­i­ties, said Howard Quayle, chief min­is­ter. Be­low, Ram­sey, the is­land’s sec­ond largest town

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