As part of this publication's series on "protecting the client" we talk to a law firm that focuses a lot of its attention on clients with international, cross-border interests and issues.

(Part of this news organisation's "protecting the client" series.)

Cross-border asset shifts are part of how individuals can protect their assets, particularly if the wealth is held in relatively liquid and transportable forms. Although the coronavirus outbreak may have dampened these flows, events such as last year’s political unrest in Hong Kong have prompted transfers, industry figures say. 

Last year, lawyers told this news service that clients had increasingly asked about pushing some money out of Hong Kong to jurisdictions such as Singapore. The percentage changes were not particularly large, but notable. Events in Asia have also prompted a hunt for so-called “golden visas” – residence/citizenship-by-investment programmes around the world. 

“Some people have contacted us to say they are concerned and talking about it. Some clients are looking at other jurisdictions to spend time in, without exceeding the time limit, so that they can keep Hong Kong as their main residence," Simon Goldring, partner at McDermott Will & Emery, told this news service in an interview at his firm’s London offices recently. 

This news service has been told by figures in the gold trading market, for example, that some Asia-based clients are sending holdings to the US and Europe, having in the past made moves in the opposite direction. Gold is the classic safe-haven asset, so much so that for hundreds of years it was worn as jewellery so it could be quickly converted to cash, and vice versa. In “unbanked” countries in the past gold has been a major source of value, in Turkey for example. Although gold is often dismissed as an old-fashioned asset, it still holds its fans. 

Away from recent flows of people and money, however, Goldring talked about how the world of international financial centres continues to evolve in this wealth protection, cross-border trend. For example, some IFCs are marketing themselves to regions in pursuit of new business. "Some IFCs, such as Jersey, are making a push into areas such as West Africa,” he said. 

Jersey and Guernsey, to give the cases of the two Channel Islands, are certainly getting on the road, whether it is beating a path to the Middle East (Guernsey Finance, March), setting up local offices in the US (Jersey Finance) or in Asia (Hong Kong). IFCs are themselves setting up shop in other IFCs, suggesting that there is not just rivalry between them, but collaboration too. And this all plays to how wealth protection is getting more complex and international. 

Out of Africa
Simon Gibb, also a partner at McDermott Will and Emery, spoke of how his firm advises South Africa-based clients about cross-border issues, whether it is about moving their persons or assets. Problems with violence and possible government land seizures without compensation have reportedly encouraged people to leave South Africa. 

Africa is one example; closer to home are concerns such as what happens where people have assets in a civil law jurisdiction such as France – with its forced heirship rules – and how this may work out now that the UK is out of the European Union. Even before Brexit, the UK, along with Ireland and Denmark, wasn’t included in a new succession regime enabling people on the Continent to choose a jurisdiction in which their will would reside. (For example, a Franco/German couple can choose to have their estate planning run from one of these countries to simplify later inheritance planning.)

Visas
Talk of cross-border wealth protection raises the case of the “golden visa” market. It creates options although there are challenges. The UK has its Tier 1 Visa regime; applicants must put down at least £2 million and have a bank account in the UK to be considered. Other regimes have different, in some cases lower, minimums, such as Malta, Montenegro or Portugal. Italy has developed its own version, meanwhile, of the UK’s non-domicile status in a bid to attract wealthy investors. These visa programmes aren’t ideal for everyone, however, and governments have a habit of changing the terms of reference if political controversy around them breaks out. (Canada, for example, mothballed its regime in 2014.)

“Clients need to review their domicile and residency status more frequently, given the changes in how revenue departments and countries operate. There is also a need to keep an eye on developments around the Common Reporting Standard," McDermott Will & Emery’s Gibb said. 

Another cross-border wealth protection issue arises in the specific case where a person, such as a relative, obtains lasting powers of attorney to look after the wealth and affairs of a person ruled incapable of acting for themselves. This can happen if a person is diagnosed with dementia, for example. But LPAs are always recognised by foreign jurisdictions, which creates problems if assets are held in different places or where relatives live in a foreign country. 

"A fundamental problem is that LPAs often don’t work across national borders,” Gibb said. 

Some parts of the cross-border wealth protection toolbox have been pushed out of use, such as secret Swiss bank accounts. (Within Switzerland, however, the law still applies.) Movement towards public registers of beneficial ownership of companies (the Channel Islands, the Isle of Man) curb the wealth protection use of certain offshore structures. If, or when, trusts go onto such registers it could hit them still further. Insurance structures, such as the private placement life insurance area, are protection channels, and are not always as well known. 

There are still tools to shield money and assets in an international setting, and the terrain is constantly shifting. It means that advisors are likely to remain busy.