Isle keen to paint a brighter picture
Images of financial chicanery at the Isle of Man are being swept away, writes Lucy Burton
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