Gibraltar financial regulation: Cracks in the Rock?

(Source: Panorama) An interesting article by Eric Ellis appeared this week on Euromoney, and later republished on Panorama, with the above title. "Financial and legal insiders in the UK overseas territory of Gibraltar argue that it complies fully with international regulatory standards," says Panorama. "But recent events suggest this might be wishful thinking, writes Eric Ellis in the August issue." The Euromoney article says as follows:>

Doing the rounds of the UK overseas territory’s tight-knit financial community, a visitor repeatedly encounters the same faces, nodding on multiple viewings as if they’re old chums. You’ll spot the regulator you just saw in his office later sipping a smoothie at Gib’s juice bar with his wife, gossiping with the banker you saw just before him. Presenters on a Sunday night chat show on the grandly named Gibraltar Broadcasting Corporation – the BBC it isn’t – discussing the impact, or otherwise, of Spanish seagull droppings on Gibraltarian tourism turn out to be two local titans of the trust sector who, naturally, are chums with the banker and the regulator.

He adds: Since there is a surfeit of lawyers, Gib insiders call themselves a barristocracy

Perish the notion that the territory is a tax haven or discreet refuge for funny money, smugglers and ex-Soviet oligarchs who could buy and sell Gib 30 times.

No, Gibraltar is positively Scandinavian in its standards, claim its boosters, a fully transparent trust centre and one of the world’s biggest, a regime where your money is secured by practices in compliance with the world’s best whatever-you-like, one of the world’s leading financial centres, says the article in Euromoney.

It adds that as it positions itself as a new Monaco, with an expanding super-yacht marina, a new airport and a friendly tax regime that attracts people like Mark Thatcher, who was recently married there, the outward impression is of a smoothly running money machine, small but perfectly formed, where everyone is lawfully on message.

But appearances aren’t always unreliable, says the article. Look beneath the Rock, and Gibraltar reveals itself as a rather clubby barristocracy that keeps bumping into itself. "Business-funded corporate regulator the Financial Services Commission is a case in point. Its board includes, respectively, the chairman of one of the territory’s biggest accountancy firms and partners of two of its leading law firms, and the recent former head of the industry lobby, the Gibraltar Bankers Association. The commission’s board is appointed by the finance minister, Peter Caruana, better known for being also the long-time chief minister," writes Ellis, adding that Caruana’s accountant cousin is an FSC director.

Far from famously solid, as the saying goes, the February collapse of leading law firm Marrache and Co revealed Gibraltar to be more wobbly than it imagines itself.

In Gibraltar itself,the report adds, the locals have closed ranks and don’t much like talking about the impact of the Marrache collapse. It’s as if the firm had never existed.

Indeed, at times, the official response to Euromoney asking about the impact of Marrache’s demise seemed close to denial. James Tipping, the dapper ex-investment banker now promoting the government’s international finance centre, seemed to regard the scandal as a trifling bagatelle. "Oh that," he said dismissively. "I don’t think it matters at all to what really happens here."

Gibraltar must be unusual among international jurisdictions in having a corporate regulatory agency that shares an office block with such companies as Party Gaming and Lucky Nugget Online Casino.

Says Tipping: "Gibraltar has always been upright, one reason why it’s an important centre for the trust and insurance industries. "We are part of the European Union, therefore we are subject automatically to all of its directives, which we adhere to," he says. The IMF, he says, recently sent in a team that gave Gibraltar a clean bill of health."

As far as the reputation for criminality and concealment is concerned, nothing could be further from the truth, says Tipping. He says Gibraltar is a fully paid-up and enthusiastic member of all significant international protocols "just the same as any European Union nation, our books are open to whoever wants to see them".

Marcus Killick, chief executive of Gibraltar’s Financial Services Commission, the territory’s corporate regulator, says he "philosophically" employs a light touch in regulation in Gibraltar.

Killick cites "international political pressures" on Gibraltar to tighten rules, which he says he argues against. "We always used to describe ourselves as having a light touch, not a soft touch," although he says things have become more robust since the 2008 financial crisis.

"Shit happens," he says.