Offshore banking isn’t all at sea

Although offshore banking has been marred by several recent scandals, heightened regulations and robust frameworks can ensure the industry remains a legitimate service for high net worth clients

Offshore banking isn’t all at sea
New compliance measures have made offshore private banking more robust than ever 

A number of recent events, including the infamous Panama Papers scandal, have identified several key issues endemic to the offshore banking industry. In response, there has been an increased focus from regulators, governments and the media on the practices of offshore private banking firms.

Yet in spite of mounting scrutiny, there continue to be very legitimate reasons both high and ultra-high net worth clients want to hold a portion of their wealth outside their countries of origin. Importantly, this remains a viable option for them due to new compliance measures and a stronger risk management framework. Indeed, recent examinations have made offshore private banking more robust than ever, ultimately benefitting all players involved.

World Finance spoke to Daniel R Wright, Managing Director of Private Wealth Management at CIBC FirstCaribbean, to find out more.

Over the past year or so, offshore private banking has experienced a lot of scrutiny. What impact has this had on the industry?
Although we have gone through a year of heightened examination and attention, with the release of the Panama Papers and even enhanced scrutiny from other countries, such as Canada, offshore private banking providers are accustomed to receiving a lot of attention. We definitely see further consolidation happening in our industry. That said, there is a place for strong compliance and risk management frameworks, as well as excellent growth in our business.

Of course, we were all troubled by the Panama Papers scandal and I think it gave us as an industry further reason to ensure that our compliance and risk management frameworks were as secure and robust as possible.

How are regulations changing in light of recent exposures?
As with private banking providers, most countries with a strong offshore offering took the opportunity to take a step back and ensure that regulations were as sound as possible. Fortunately for most of us, we operate in countries that are leaders in this field and early adopters from a regulatory perspective – the Cayman Islands being a great example.

Do you think offshore private banking will become more robust as a result?
Absolutely. I don’t think it was not robust to begin with – however, any opportunity to take a fresh look and ensure that our process and procedures are as vigorous as possible is important for us all.

There are still negative connotations to the word ‘offshore’ and its presumed association with tax avoidance, which is not the case

There has been a great deal of consolidation over the past few years, and the business has certainly changed and matured since 2008. I think for those solid financial institutions in the region with strong capital, and that are committed to understanding the business, the market continues to grow, and there are numerous opportunities out there.

What challenges still exist, and how are they being overcome?
I think education remains one of our biggest challenges. There is still a perception and negative connotation to the word ‘offshore’ and its presumed association with tax avoidance, which is not the case. Long gone are the days when offshore banking may have contributed to a decrease in onshore tax revenues and opportunities.

There are many fully compliant and legitimate reasons why high and ultra-high net worth individuals continue to hold a portion of their wealth outside their country of origin and have a need for financial institutions to provide these solutions.

What safeguards does CIBC FirstCaribbean have in place to prevent money laundering and other illicit activities?
CIBC FirstCaribbean has a very robust risk and compliance framework that is followed by all of our business lines within the region. We comply with local regulations in all the jurisdictions in which we operate and hold ourselves to the standard of our parent company, CIBC, as it relates to our AML framework.

Our compliance and audit functions routinely and independently verify and assess the strength of our controls and adherence to those controls through regular conformance reviews across the countries in which we operate, and our individual business lines.

What sets CIBC FirstCaribbean apart from its competitors?
First, our commitment to the region and the communities in which we operate. Also, our dedication to providing the highest level of service, as well as our integrated private wealth service offering, which includes core banking, trust and investments.

What are the company’s plans for the future?
We will continue to actively grow in the region; we are truly committed to the Caribbean. Moreover, wealth management – including trust and private banking – has been identified as a strategic priority for growth. This year we will supplement our current private wealth offering with a full service investment advisory business in the countries in which we operate. We will also continue to review and expand our private wealth team of professionals and service offerings.