Paradise Papers means more wealth regulation

Wealth management companies should brace for more regulatory scrutiny as a result of The Paradise Papers, according to GlobalData.

The data and analytics company said unsurprisingly, the papers have shown little in the way of wrongdoing in terms of intentional criminal tax evasion and unlike previous leaks, wealth managers did not need to worry about fines and direct legal action due to these revelations.

Financial services head of content for Asia-Pacific, Andrew Haslip, said the revelations would only intensify political appetite for increasing regulatory scrutiny of anyone involved with the wealth management industry.

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This would lead to calls for more legislative action from politicians around the world, resulting in more “burdensome” regulation for those operating in the offshore market and more compliance issues to deal with.


This would then drive further consolidation in the offshore private wealth space as more private banks sold up marginal operations.


The International Consortium of Investigative Journalists published the Paradise Papers, which consist of 50 years of business activity by Bermuda-based law firm, Appleby, that specialises in offshore clients. They document a range of legal structures and strategies used by corporate and individual investors globally to minimise tax liabilities. Most concern clients in the US and UK but also includes Hong Kong and China.


“Despite the almost 13,000 clients originating in Hong Kong and China, the direct implications for wealth managers in Asia-Pacific are likely to be minimal,” Haslip said.


“Unlike previous leaks, few reports on the subject appear to show any intentional criminal tax evasion by those involved. Mostly the papers highlight how properly structured and packaged offshore assets and income can be held entirely legally and attract little in the way of direct tax liabilities, provided they remain offshore.”


GlobalData’s 2017 Global Wealth Managers Survey showed tax efficiency was the second most important reason for offshoring wealth globally among high net worth (HNW) investors, cited by 18.2 per cent of wealth managers. In contrast, client anonymity ranked at a distant 2.8 per cent.

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