Rethinking IFCs: A Serving Of Transparency, With A Side Of Substance

Author:Labuan IBFC Inc.
Profession:Labuan IBFC Inc

Transparency and substance is the new staple for a modern and successful IFC, while continuous subscription to the highest money laundering and terrorism financing standards a given.

There is a lot on the plate of international financial centres (IFCs) today, mostly brought about by the winds of change from numerous global multilateral initiatives. IFCs around the world will need to reposition their value propositions to remain capable of operating successfully, while creating a level of acceptability from a reputational angle.

Moreover, the various international country groupings and standard setting organisations/bodies have made continuous demands to enhance transparency and sound prudential requirements for a more equitable and fairer allocation of economic wealth, whilst promoting international financial stability. These changes in operating models were precipitated by unprecedented global events, particularly after the Global Financial Crisis that erupted nearly a decade ago.

The fact remains that most IFCs aim to provide a convenient and business-friendly location for international trade and investments, which often facilitate centres to innovate, addressing the gaps between national and domestic laws for international cross-border transactions.

However, this appealing feature of IFCs is often misunderstood as vulnerability and an avenue for regulatory arbitraging that affects the global economy and financial system, making these centres easy targets for headline grabbing accusatory claims.

It is often claimed that IFCs are havens for structures that minimise tax exposures. Such claims stemmed largely from the lack of information about IFCs and aggravated by news of tax planning strategies of some multinational corporations.

There is an overarching common belief that IFCs offer financial secrecy, through the purported absence of proper due diligence in accepting new investors. While this could well be true in the past, this perception is misplaced today as studies and assessments have affirmed that most IFCs have conformed to international standards by dismantling banking secrecy and introducing beneficial ownership transparency mechanisms.

In addition to transparency, another key thrust in securing the future of IFCs is substance creation, as pure brass-plating and shell structure concepts become no longer internationally acceptable.

Indeed, some commentators have remarked that never before has so much public attention been focused...

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