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Channel Islands Under Threat From US Regulation

by Amanda Banks,, London

03 November 2010

Proposed legislation in the United States, scheduled for introduction in just over two years' time, is to have major implications for the financial services industries of Channel Islands of Jersey and Guernsey, a lawyer has warned.

Stephen Platt, a specialist financial crime and regulatory lawyer and Director of the Jersey International Business School, has issued a warning to the industry that they need to act now to combat "the broadest tax and information exchange legislation ever enacted in the United States." The impact will be felt across the banking, funds and wealth management sectors, Platt said.

The US objective is to combat offshore tax evasion through increased information reporting and withholding tax requirements involving offshore payees and accounts beneficially owned by US citizens.

The US Treasury and legislators are pressing ahead with the introduction of the HIRE Act, a part of which, the Foreign Account Tax Compliance Act (FATCA), has been designed to keep closer scrutiny on the overseas finances of US citizens and places significant extra compliance burdens on foreign finance institutions, with penalties for those that fail to comply.

Under the current proposals trust companies which fail to sign up to the Act, which requires them to determine whether settlors or beneficiaries of a trust are US persons, would suffer a 30% gross withholding tax on all returns from US investments.

Commenting on Act’s implications, Platt stated:

"There will be a requirement for finance industry firms in Jersey and Guernsey to amend their account opening procedures; there will be significant challenges to existing IT systems and the measures will impact on product development. Firms in both islands cannot ignore the compliance obligations because of the international nature of their businesses and they will need to look closely at the proposed measures soon to give themselves time to respond internally to any new US rules."

Platt is to cover the topic at the sixth annual Economic Crime Symposium where he will join a wide range of other specialist speakers, organized by the Jersey International Business School in association with BakerPlatt, in France on November 11.

A comprehensive report in our Intelligence Report series, examining in depth the situation of offshore transparency and secrecy in a number of the most prominent jurisdictions, is available in the Lowtax Library at and a description of the report can be seen at
TAGS: compliance | tax | investment | business | law | banking | financial services | Guernsey | Jersey | offshore | legislation | withholding tax | United States | penalties | services

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