Channel Islands well-placed to meet new recommendations

Thursday 20 June 2019

The Channel Islands are in a strong position to comply with principles set out by 'The Role of Lawyers and International Commercial Structures' task force, according to Bedell Cristin's Managing Partner.

The task force was set up in late 2016 as part of a joint initiative between the Secretariat of the Organisation for Economic Co-operation and Development and the International Bar Association.

It was formed in response to the controversies relating to the Panama and Paradise Papers.

The final report, released last month, recommends eight principles to governments, national bar associations and law societies.

"From the perspective of lawyers in the Channel Islands there is little new in the principles," said Bedell Cristin Managing Partner, David Cadin. "For example, Principle 3 concerns 'client due diligence' and states that a lawyer should undertake and document all reasonable and proportionate enquiries in order to identify and verify a client. This is already standard practice in the Channel Islands."

However, Mr Cadin warned that, if the principles were agreed, there would still be would still be work to do for island firms and clients involved in multi-jurisdictional work.

"While the Channel Islands already comply with most of the recommendations, there is a seemingly minor point in Principle 7 which could have major repercussions," he continued. "'A lawyer should obtain and maintain up-to-date beneficial ownership information and take reasonable measures to verify its accuracy in relation to the lawyers clients'.

"Obtaining the material at a certain point in time is one thing, but maintaining it as accurate and current at all times, long after the retainer has come to an end, is quite different. The concept of 'once a client, always a client' has implications far beyond the intended scope of this report."

Mr Cadin also stated the report's suggestion that 'domestic laws should provide for the disclosure of ultimate beneficial ownership of any corporation, trust or other legal entity formed within that country's jurisdiction,' could significantly change the basis of the Channel Islands' approach to anti-money laundering, corruption and terrorist financing.

"Currently it is the duty of the service provider to ascertain this information but the report's recommendation shifts the obligation to the, possibly foreign, entity to disclose this," he added.

"Quite how regulators and others will react to that recommendation remains to be seen, but this would be a significant, global change in approach. The principles show the possible future direction of regulatory development and clients should therefore consider these now, if only to give themselves justifiable answers in future."

Pictured top: David Cadin.