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Wealth managers must brace for more regulation following Paradise Papers, says GlobalData
14/11/2017 , News Team

The Paradise Papers are likely to cause little in the way of direct implications for offshore wealth managers in Asia-Pacific, according to data and analytics company, GlobalData.

Andrew Haslip, financial services head of content for Asia-Pacific, says that all the latest release will do is stoke more political appetite for increasing regulatory scrutiny of anyone involved with the wealth management industry. This will likely drive further consolidation in the offshore private wealth sector though, as more private banks sell up marginal operations, he argued.

He commented: “Unlike previous leaks, few reports on the subject appear to show any intentional criminal tax evasion by those involved. Mostly the papers highlight how properly structured and packaged offshore assets and income can be held entirely legally and attract little in the way of direct tax liabilities, provided they remain offshore. Indeed, GlobalData’s 2017 Global Wealth Managers Survey shows that tax efficiency is the second most important reason for offshoring wealth globally among high net worth (HNW) investors, cited by 18.2 percent of wealth managers. In contrast, client anonymity comes in at a distant 2.8 percent.”

As such, for Mr Haslip, it is unsurprising the leak shows little in the way of wrongdoing, and unlike with previous leaks wealth managers have little to worry about in terms of fines and direct legal action as a result of these revelations. But in the longer term the papers are likely to contribute to further regulatory scrutiny of the industry and doubtless lead to calls for more legislative action from politicians around the world. The net result is likely to be even more burdensome regulation for those operating in the offshore market and yet more compliance issues to deal with, he noted.

Mr Haslip added: “Marginal players in the offshore wealth market are likely to see this as a key milestone at which to reassess their business. Given that recent years have already seen a number of foreign private wealth managers selling their operations in Asia-Pacific, the Paradise Papers are likely to prompt some reassessment of any small scale offshore operations in Asia-Pacific as well.

“Those operating below the scale necessary to generate decent margins are likely to jettison their offshore divisions, continuing the trend of consolidation in Asia-Pacific’s offshore market that has already seen many top wealth managers retreat from this previously lucrative line of business.”


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