Guernsey: Offshore Business Sectors
Trust management, particularly for wealthy UK individuals, was the island's traditional business. Successive tightenings of UK anti-avoidance legislation have reduced the possibilities for UK citizens, but Guernsey's trust business has continued to grow based on a more international clientele. Many Collective Investment Funds are also of course based on trusts.
As of February 2008, the Island hosted more than 140 licensed fiduciaries, this figure in 2013 has risen to well over 800, ranging from large organisations to independent, boutique operations. Together, they held between GBP200 and GBP300bn worth of assets in trust. The island has a very well-developed legal and financial infrastructure for trust management; the highly sophisticated professional services which support the trust sector include lawyers, accountants, investment managers and stockbrokers.
The Trusts Law 1989 (updated in 2007) provides a modern statutory basis for trust management activity. The Edwards Report acknowledged that Guernsey ranks highly among IOFCs for the quality of its regulation. Unlike the banking sector, however, the Guernsey trusts industry had not been subject to any formal system of supervision. Partly as a result of the Edwards Report, a law was prepared by the States' Advisory and Finance Committee under the name of The Regulation of Fiduciaries and Administration Businesses (Bailiwick of Guernsey) Bill 2000. The law - known as the Fiduciary Law - came into effect on April 1, 2001.
Individuals and businesses involved in the provision of fiduciary services had to submit a licence application to the Commission by May 31, 2001. The Commission received a total of 179 applications for a full fiduciary licence and 70 applications for a personal fiduciary licence.
The law contains a 'four eyes' rule, standards for capital adequacy and compulsory indemnity insurance. The offer or provision of fiduciary services without a licence will incur criminal sanctions. A full licence is required by any company, wherever registered, providing fiduciary services in the Bailiwick and by Guernsey-registered companies providing fiduciary services anywhere in the world and individuals, acting as directors or trustees by way of business, need a personal licence. Prudential rules have also been imposed; clients' funds need to be segregated from other trust assets; and new accounting safeguards have been installed.
The annual fee for a full fiduciary licence is dependent upon the annual turnover from regulated fiduciary activities. See Offshore Legal and Taxation Regime for full details.
The law provides extensive powers to the GFSC in the granting, refusal, revocation, and application of conditions to fiduciary licences. It will also have authority to control the names of, and advertising by, fiduciary businesses, rights to obtain information and documents, and powers to conduct investigations. The Commission states that the Bailiwick of Guernsey is one of the first jurisdictions to establish a statutory system of fiduciary regulation.
New trust legislation (the Trusts (Guernsey) Law, 2007), which was approved in July 2007, came into force on March 17th, 2008. The changes overall are designed to create a more flexible framework for the local trust industry, and to ensure that Guernsey, as a jurisdiction for the establishment and administration of fiduciary structures, remains well placed and competitive. See Law of Offshore for a fuller description of the 2007 legislation.