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p6 Budget latest Aug/Sept/Oct 2010p12 Extending compliance

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Hedge Fundscoups showthe way

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Looking to the futureEDITORIAL COMMENT

How much better can it get?Gibraltar’s economy keepsexpanding, having experiencedcomparatively little effect ofthe world economic crisis. Investment innew infrastructure continues unabated,without reaching anything like the debtlevels of other countries.

The growth in Gross DomesticProduct (GDP) – a good measure of an economy’s success -is enviable at 5 per cent yet again with the total to end-March now exceeding £900m. As such Gibraltar has oneof the highest GDPs per capita anywhere in the world!

Of course it’s not all been good news; some sectorshave experienced difficult times – construction and retailare examples – but even then it is patchy; some good,others less so.

The May Chamber of Commerce annual TradingConditions survey suggests all sectors are optimistic aboutGibraltar’s prospects in the long term, although a third ofrespondents had been affected by one or more recentbusiness collapse.

It’s great news therefore, that some localentrepreneurial spirit remains on The Rock, asdemonstrated by the success of four college students indeveloping GibSights, with the first audio walking tour ofGibraltar, and reaching the Young Enterprise schemenational finals in London.

Apparently, the Chamber says companies in manysectors are holding back their investment decisions untilthere is certainty on the introduction of a new 10 per centCorporation Tax across the board.

Well, the draft Tax Act giving effect to the newbusiness tax from January has been published, albeit laterthan expected. The only slight uncertainty is theoutstanding appeal by Spain against the European Court ofJustice decision in support of Gibraltar’s right to set itsown tax rates independent of the UK.

The government is pressing ahead regardless and at thesame time promising future lower personal taxes, providedeveryone – business and individuals - contributes their fairshare, on time.

Little wonder then that those with a wider visionoutside of the jurisdiction feel confidence in what is onoffer and are deciding to establish a Gibraltar base.

Major hedge funds, Hilton and other hotels, evenmajor airlines – all are convinced that the territory hasplenty to offer, despite existing local players complaining of“continued increases in costs … and increased competitionfrom Spain and elsewhere”.

Some £119m is being spent on capital projects in thecurrent financial year, the latest Budget having added£92.5m to the pot.

However, it’s unfortunate that some continue to carpon about the ‘huge’ £50m cost of the airport terminal withits business aviation centre – planning for the next halfcentury does mean considerable up-front money, it shouldreflect the prosperity of the community, and it’s being builtnow anyway.

But clearly, everyone will need to see the finishedproduct next year before feeling “totally impressed, betterthan its new counterparts in Madrid and Barcelona”, asMinisters suggest!

NEWS P6-10Protecting reputationPutting Gibraltar ‘on the radar’Budget - uncertain tax incomeLow tax depends on all paying taxBudding business youngsters

COMPLIANCE P12Limiting risk on The Rock!L

TANGIER CHALLENGE P14

FUNDS P16-18Hedge Fund Coups Revealing strategiesWaiting on ‘third country’ rules

PROFILE P21-24Victor Chandler, World Cup decides fortune

PEOPLE AND PLACES P26-27

ENVIRONMENT P28-29Gaining an “A” for offices and homes

REGULATION P30Closer supervision identifies problem areas

Aug/Sept/Oct 2010 Volume 16 / Number 3

Published by GibraltarInternational Publications Ltd.1/5 Irish Town, Icom House, Suite 6/PMB 104PO Box 561, Gibraltar

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Contents

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Gibraltar InternationalMagazine is available onsubscription, 4 issues postedto: UK £24 - EU £32 - Rest of World £44.

© 2010 Gibraltar InternationalPublications Ltd.

GIBRALTAR INTERNATIONAL MAGAZINE

NEWS


A top hedge fund managerhas established his businessin Gibraltar rather thanLondon, the main centre forcapital asset managers inEurope, and successfullylaunched what is reportedlyone of the largest funds fortwo years worldwide!

Raising more thanUS$500m, the inauguralBurren Global ArbitrageFund was launched in Julyand is the latest in a series ofcoups for the low-tax juris-diction that has meant morebusinesses locating forGibraltar.

The Gibraltar FinanceCentre Council (GFCC) hasbeen receiving presentationsfrom marketing communica-tion companies to develop astrategy for giving the juris-diction a higher profileamong target sectors andopinion formers in the UKand elsewhere.

A 2011 initiative seemslikely to follow January’splanned introduction of a 10per cent Corporate Tax ratefor all companies - the TaxExempt status presentlyenjoyed by nearly 3,000locally registered businesses,including some banks andinsurance companies, is beingremoved.

But the low tax on busi-ness profits has been avail-able to businesses new toGibraltar since July 2009.

There remains s a feelingamongst GFCC membersthat more needs to be done topromote the package of ben-efits Gibraltar can offer tobusinesses considering relo-cation of all or part of their operations.

Burren Capital AdvisorsFund manager AndrewMcGrath told GibraltarInternational that although“London was traditionally apopular choice with mypeers, the fiscal reality ofLondon was no longer attrac-tive to me from a personal orcorporate tax perspective”.

‘Star’ traderThe ultra-low profile firm,Burren was formed earlierthis year with offices inOcean Village after McGrathleft the UK’s BNP Paribas, asone of the bank’s star ‘specialsituations’ proprietarytraders and its head of riskarbitrage in Europe.

McGrath’s first solo fundspecialising in investmentarising from significant glob-al company and other events,has an overall capacity of thestrategy in the region ofUS$750m, without detrimen-tally affecting returns.

“After the initialinvestors have subscribed,my intention is to close thefund to new investment for aperiod of at least 12months”, when he hopes toallow existing investors toincrease their allocations.

This activity follows thedecision of his associates in

Putting Gibraltar “on the radar” as topfunds firms move in

NEWS


"Working together to promoteGibraltar", Nick Cruz of GFCC

Gibraltar could learn fromwhat Guernsey and the UKhave done to help protect thereputation of their financialcentres from the effects ofbribery, corruption and fraud,key speakers suggested at aRisk on the Rock seminar.

World money launderingspecialist Jeffrey Robinson,who has lived in the UK, theChannel Islands and else-where in Europe for 30 years,maintained that lawyers’ con-fidential client accounts andprivate trusts are prime areaswith potential to harm a juris-diction’s valued reputation.

Standard due diligencewas not enough. “If your rep-utation matters to you, you’vegot to check it out,” he saidalleging that even SaddamHussain had at one timefooled the system and chan-neled money throughGibraltar using at least twocompanies removed to avoiddetection!

Going beyond KYCPeople unconnected directlywith any identified problemorganisation, or who do notappear on any ‘watch’ list,are used by others to handle their money, he arguedand added: “[the process of]Know Your Client (KYC)doesn’t work.

“For all the emphasis onKYC, because the bad guyshave got so good at it, yourclient is going to look totallylegitimate. What you have todo is Know Your Client’sclients – and his suppliers;you’ve got to go behind thefront person.

Chief Minister PeterCaruana agreed, stating:“There is no substitute for

commitment to preservingour jurisdictional reputation,which in a sense is our solestock in trade.”

Compliance and reputa-tion went hand in hand asGibraltar moved deeper intothe complexities of main-stream financial services ininsurance, fund managementand investor services, he said.

But the government feelsthat compliance could well beextended beyond financialservices companies toembrace lawyers’ handling ofclient accounts, data manage-ment and on-line gaming.

Caruana declared that inrespect of lawyers, the gov-ernment would want to “getstuck in to a greater degree onthose aspects of the financialcentre jurisdictional reputa-tion” and this included clientaccounts and participation infinancial services.

Robinson recalled thatGuernsey at one time “repeat-edly was approached by legit-imate law enforcement agen-cies wanting informationabout trusts. The chief minis-ter there recognised it was hisisland’s reputation at risk, andpassed a law so that whenev-er a legitimate law enforce-ment agency asked about atrust, the information wouldbe given up.

“Secrecy is dead”, heassured as the jurisdiction hadto be seen to be doing theright thing. “Several accountsleft that island, and nowdoing business in Guernseyhas the patina of legitimacyand, I am told, they are mak-ing more money now beingtransparent than they ever didwith dirty money,”

“potentially very much betteroff”, Caruana was at pains toemphasise.

Proposals to developnew products and improvelegislation in other, non taxareas will be considered bythe Government, which willwork with various sectors ofthe Finance Centre toenhance its attractiveness.

In the past year, theFinance Centre “has markedtime and held its own well inthese very difficult times,resulting mainly from theglobal recession, and finan-cial and banking crisis whichhave hit volumes of businessand revenue” and as a resultlost 80 jobs.

Despite this a number offinancial sectors, especiallyinsurance and fund manage-ment had developed in inter-national markets.

Overall, employmentlevels had fallen in someareas and risen in others leav-ing the job total of 20,450just 59 down on the 2009record.

Stepping intoofficesConcerned at the lack ofavailable office space, which“is proving to be an obstacleto companies seeking toestablish or expand opera-tions in Gibraltar, and thuscurtailing our economicgrowth and development”,the government is consider-ing stepping in to remedy thesituation.

“We are not willing tolend taxpayers’ money todevelopers to allow them tomake a profit”, but theGovernment is negotiatingwith the developers of the

£120m Mid Town Project“to become a majority share-holder in the development ofthe first phase, thus ensuringthat taxpayers get their fairshare of development prof-its”.

Phase 1 is for RockTowers, a 10,000sq ft, 13-storey office block with park-ing, costing some £30m onthe site of a multi-storey carpark just outside ofGibraltar’s city walls.Commercial DevelopmentsInvestments (part ofMontagu Group) says 25 percent of space has alreadybeen reserved for sale or rent.

As Caruana noted: “Theeconomic needs of Gibraltarfor more office space aregoing unsatisfied, notbecause of lack of demandfor office space here, butbecause bank finance isunavailable for reasons thathave nothing to do withGibraltar.”

Generally, the privatesector experienced variedperformance, “althoughthere is no getting away fromthe fact that the global reces-sion and the banking crisisand resulting credit crunch,are affecting everyone tosome degree or other”,Caruana conceded.

Justified optimismNevertheless, the sector

“is proving remarkablyresilient and robust. Despiteshort term concerns, there isjustified optimism acrossalmost all sectors in thelonger term”, he said.

The Government sharedthe objective of ending themost obvious examples of

Rooting out ‘dirtymoney’ protects reputation

Continued page 14

Gross Domestic Product(GDP) grew by 5 per cent lastyear to reach £914m and isexpected to increase by asimilar amount in the currentperiod, resulting in “anothergood year for our economy”,says Chief Minister PeterCaruana in his latest Budgetstatement.

“The financial positionremains in very goodhealth…the overall recurrentbudget surplus of £29.4m, isan all time record high” andrepresents nearly 10 per centof overall Governmentexpenditure, he toldParliament.

This provided Gibraltarwith “a comfortable fiscalbuffer at a time when mostgovernments are strugglingwith fiscal deficits”.

But importantly, it pro-vides a cushion against anexpected temporary fall inrevenue from company taxthat is being cut from 22 percent to a new low 10 per centrate from January – a declineof over 70 per cent since2007 – and immediate reduc-tions in personal tax!

Revenue in 2010-11 willbe more volatile because ofthe much reduced tax rateand complex transitionalprovisions – a £10m fall inCorporation Tax to £18m isexpected, “but the reductionmay be greater”.

To cushion the overalleffect, Caruana is “rebalanc-ing” revenue streams byincreasing: commercial ratesby 12 per cent; commercialelectricity tariffs by 10 percent (although as standingcharges are unchanged, theaverage rise in bills will bearound 6 per cent); and

employer social insurancecontributions by 10 per cent.

It was not realistic toexpect the Government to“take on the chin” the fulleffect of more than halvingcompany tax overnight.

Not realistic“What is not known withany reliable precision is howmuch will be contributed inits place by companies thatare presently exempt and willstart to pay tax on 1 January2011. Nor do we know withcertainty what disruptiveeffect on revenue may resultfrom the application of thetransition period”, Caruanaadmitted.

Cutting personal taxeswould benefit people alreadyliving and working inGibraltar, and also make it“an increasingly attractivepersonal tax jurisdiction fornewcomers” – businesses,their owners and staff, andHigh NetWorth Individuals.

The new company taxrate is “a trade off”, adding asmall amount to businessfixed costs, but leaving exist-ing company taxpayers

Tax income cut uncertain, but still expect a "good year"

Continued page 16Continued page 10

Budget NotesRecord surplus: £29.7mGDP up 5.5% to £914m£106m capital projectsin 09; £150m for 2010£139m net Public Debt– 15% of GDPPublic stake in big officedevelopment10% Corporation TaxLower personal tax &higher thresholdsEmployers’ socialinsurance up 10%Commercial rates up 12%

NEWS


Tough anti-avoidance meas-ures and default financial andlegal penalties to help ensurethat all pay the taxes that aredue are needed to ensure a lowrate for everyone – businessand individuals.

That’s the view of theGibraltar Government regard-ing its new, amended and con-solidated Income Tax Act thatalso introduces “severe crimi-nal consequences, as well aspersonal liability, for directorsand managers of companiesthat withhold tax from work-ers pay and then fail to pay itover to the Governmentpromptly”.

The draft Act, expected tobecome law in October, setsout “to level the playing fieldbetween PAYE payers on theone hand and companies andself employed people on theother”

Self-employed people willhave to pay tax during the taxyear on account of that year’stax bill. At present, employeespay tax at source, while com-panies and the self employedcan delay payment of their taxfor several years. “The newsystem is thus fairer to all”, thegovernment maintains.

Gibraltar’s era of lowertaxation meant theGovernment had the fiscalneed to tighten up tax evasionand avoidance, Chief MinisterPeter Caruana told Parliament

Name and shameConsequences for employerswho engaged consciously in“serial non-compliance” oftax obligations, also includeda name and shame approach,restrictions on being able toresume business activities infuture, and other deterrents,

he said.“Only by creating a cli-

mate of compliance can lowcompany tax and further low-ering of personal taxes beassured”, the governmentmaintained as it unveiled thelegislation that will permit thereduction of Company Tax inGibraltar from 22 per cent to10 per cent from January2011, to coincide with theabolition of the historical taxExempt Company regime.

However, firms formedsince July last year have beenalready able to enjoy the low10 per cent rate as a result ofthe 2009 Budget measures.

The legislation also intro-duces a system of self assess-ment and hefty financialpenalties for defaulting onpayment or returns and repre-sents several years work bymany people, including

officials, lawyers, accountants.

Competitive tax“The underlying principleshave thus already been widelyconsulted,” Caruana noted ina statement and added:“Thousands of local jobs,much Government revenueand thus our public services,depend on Gibraltar having aninternationally competitive taxsystem.”

Returning to his nowfamiliar theme, Caruanaemphasised: “Gibraltar ismore than just about tax: it isalso about political and eco-nomic stability, good regula-tion and high standards andsafe business environment,high quality of personal lifestyle, good professional servic-es and communications, andavailability of well educatedstaff.” Having consulted, thenew Bill will be published inthe government's mid-AugustGazette.

Low tax depends on all paying

Two large new hotel develop-ments are reaching “agree-ment in principle”, asGibraltar works to completeits new air terminal and a keytourist hotspot before thestart of the summer 2011.

Together the projectsinvolve more than £100minvestment and are seen asnecessary both to support andencourage increases in visitornumbers and events, and pro-vide tangible confidence inThe Rock alongside theexpanding finance sector.

‘Heads of agreement’with the government are byAutumn expected to be signedby Squarestone, the UK devel-oper of a planned 200-bed-room, 5-star Hilton Hoteland a separate developer of asimilar sized mixed hotel andaparthotel resort at Little Bay.

There’s an expectation

too that there will be a posi-tive step forward inSeptember in the long-await-ed £1.8bn East side develop-ment, where a 250 roomhotel, 2,500 apartments,shops and office space isplanned.

Minister for Developmentand Transport, Joe Hollidaysaid that work on the 28,000M2 site of the RoyalGibraltar Yacht Club could bestarted in mid-2011 bySquarestone, which developsproperty for Hilton hotelfranchises. The £45m hotelproject includes banquetingand conference facilities for500 people.

Yet another hotel projectmay result from the proposedre-development of the formerBuena Vista Barracks in theSouth-Western area ofGibraltar, which includes

Stone Block, currently aworkers’ hostel, beingretained as a heritage proper-ty suitable for conversion.

Both the new £50m air-port terminal, catering for upto 980,000 passengers a year,and £3m beautification oftourist favorite Europa Point,with its planned ‘iconic’restaurant, playing, picnicand parking areas, will beready by June 2011.

After viewing the new ter-

minals at Heathrow, Madridand Barcelona, Hollidaybelieves the new terminal thatreplaces the 1960’s-built pres-ent one “will be somethingthat people will feel utterlyimpressed by – a facility wecan all feel proud of”.

It includes three large lug-gage carousels, 19 retail units(up from seven now), smartrestaurant and lounge, a busi-ness aviation centre for pri-vate aircraft, and a direct exitinto Spain – “although thatmay not be ready when weopen”.

Holliday met recentlywith 12 airlines and impor-tantly, other UK airport oper-ators in a bid to forge a ‘pack-age link’ from which bothdestinations can jointly bene-fit. “The result has beenencouraging and others nowappreciate how impressiveour offering will be,”Holliday maintained.

New hotels and airline links expected

cross [Spanish] border com-petition unfairness, but “weequally believe that an openeconomy is, on balance verymuch in Gibraltar’s interests”but is open to specific effec-tive but sensible measures. Aworking group with theChamber of Commerce andthe Federation of SmallBusinesses will be formed inearly autumn.

Overall recurrent rev-enue last year was £334m, ayear-on-year increase of 9 percent, while recurrent expendi-

ture was £305m, just over 6per cent more on a compara-ble basis, resulting in the near£30m budget surplus.

Company and gamingtax is forecast to have pro-duced nearly £40m income(up £4.4m); the largest rise inexpenditure was to fund debt- £11.7m (up by £6.2m).

Capital spending thisyear of £150m (£106m in2009-10) is being fundedprincipally by borrowings,supported by the proceeds ofasset sales and premiumsmade possible “because of

the very low levels of debtthat the Government hasmaintained and also the suc-cess of our economy”,Caruana declared.

He said the Governmenthad decided to bear the costof “unnecessarily largeamounts of borrowing inorder to assure its fundingand liquidity needs in the cur-rent volatile internationalfunding market conditions”.

At £139m, net publicdebt is just 15.2 per cent ofestimated GDP. Caruanaestimates that net public debt

will finish this year at £180m,still “only a lowly 18.7 percent of GDP”. Thereafter it isexpected to peak at around23 per cent of GDP (less thanhalf the maximum allowed inlaw), before falling againonce the projects programmeis complete.

“Government’s debt isstructured with a high degreeof stability, both as to interestcost and maturity roll overrisk, unlike so much of the currently problematicEuropean sovereign debt,” heassured.

NEWS


After two years supportingthe Young Enterprise (YE)Scheme, Gibraltar has justspawned its most successfulventure yet. Four teenage col-lege students having identi-fied and exploited a gap inThe Rock’s tourism market.

The youngsters studyingfor ‘A’ Level and GCSEexaminations launchedGibSights, an audio-basedtwo hour Walking Tour ofthe main tourist attractions,in April and have so far soldwell over 300 of the MP3player units and are expect-ing delivery of another 300units – from China.

Working in their own,out-of-college study time, thegroup “came up with thebrilliant idea of creating aground-breaking productthat had never been done inGibraltar”, declared MariaAntonia Brooks, YE coordi-nator at Gibraltar College.

“They had support fromlocal business with an over-whelming 29 local compa-nies choosing to advertise in their tailor-made map that accompanies the Mp3 player”, she added.

The team is made up ofMark Moreno (17),Managing and FinanceDirector, Syanne Agius(19),Human Resources Directorand Company Secretary, 16years old IT & MarketingDirector Sarah Martinezisand Joel Williams(18) asSales and OperationsDirector.

They won the Yorkshire& Humber and Gibraltarregional final in Hull in June,having earlier come out topof the five companies in theYE scheme from the College.They also gained the prize for‘innovation and entrepre-neurship’ ‘and the customer

focus, marketing and sales’award.

The GibSights team werepreparing for the nationalfinal in London as GibraltarInternational went to press inJuly, having gained sales ofover £5,000.

As David Benrimoj,College ‘Link’ teacher forGigSights, explained: “Thisscheme aims to give young-sters a real life work experi-ence and introduce them toaspects such as selling tech-niques, research and timemanagement that might nototherwise be covered in thecourses they are studying”.

The business has its own

web site and any profit madefrom selling the 1GB tourand player at local shops andtourist sites can be kept bythe students, after deductionof a small royalty to the YEenterprise in the UK.

“Having visited Madridand experienced a similarproduct for that City, theteam realized that there wasnothing like it at home inGibraltar, so after consulta-tion with the Tourist Boardand sounding out visitors atthe Cruise Terminal and else-where, they set about devel-oping GibSights”, Benrimojrecalls.

The young entrepreneurssourced the players on theinternet direct from China,having found UK suppliers“far too expensive”. Thatallowed them to develop theproduct with a reasonablerecommended retail price of£14.99 for 24 separate loca-tion tracks, and ten bonustracks detailing other pointsof interest, including the his-tory of the border with Spain.

The YE scheme, beganover 40 years ago in the UKbased on the ‘principle oflearning by doing’ and withthe help of Business Advisorsand Link Teachers, the stu-dents have evolved as ‘new’young entrepreneurs.

Budding business youngstersspot tourist market gap

Sarah, Mark, Syanne and Joel receiving their Gibraltar Young Enterprise Award.

Continued from page 7

On-line gaming companies,data management firmsand, most controversially,lawyers, as well as other –so far unnamed – areas of

business beyond financial services are inline for closer scrutiny to ensure compli-ance with processes and systems requiredby law.

In particular, lawyers’ private clientaccounts and individual’s trusts areexpected to come under the microscope.

Chief Minister Peter Caruana told acrowded Gibraltar Association ofCompliance Officers (GACO) seminarthat there is “a very strong case for younow to consider expanding your reach toembrace other, and all regulated, activi-ties where compliance is at the core”.

This is “more and more important toGibraltar as it continuesincreasingly to emphasise itsfuture in quality, well regulat-ed mainstream financial serv-ices”, he told more than 160people who attended the Riskon the Rock - bribery & corruption in the 21st centuryseminar.

Jeffrey Robinson (pic-tured), the world’s leadingexpert on money launderingand financial crime, said: “I tip my hat tothe Chief Minister.

“These days everyone is in financialservices –if I want anything in financialservices that you sell, I can get it in anynumber of other places. What is uniqueis that it is Gibraltar - and its reputation.It is the name that makes it special –youare not any other country”.

And warning that criminals are get-ting still smarter, he said: “[The practiceof] ‘Know your client’(KYC) is notenough – you’ve got to know yourclient’s client – and then some more” toensure the legitimacy of the source ofmoney and the businesses dealing with it.

“Everyone wants to comply with theregulator. You can no longer count onjust being compliant, you have got to goone step beyond,” emphasized Robinson,author, journalist and a native NewYorker who has lived in Europe for morethan 30 years.

And Gibraltar’s Financial ServicesRegulator Marcus Killick conceded: “Asregulators we are notoriously bad atcatching fraud.”

But he gave notice of a harder line infuture. “In Gibraltar, we will ask thegovernment to make some regulatorychanges, because there are gaps in thelaw, which was introduced ten years ago.

“We have to deal with the presentgaps and some future ones! We will bemore intrusive, moving from a light to arobust, but responsive touch. We will be

more assertive, without over-reacting.”

Caruana had earliermade clear: “This conferenceshows the maturity of ourfinancial services centre, toopenly debate these issues –not because we believe theyare a problem in Gibraltar,but because we understandthat others can abuse ourfinancial services system to

perpetrate such acts in other parts of theworld.”

In the changing global financialorder, “reputation is key and complianceis reputation and therefore key to reputa-tion”, the Chief Minister said. “Ensuringinternal compliance within an organiza-tion is very much the same discipline,whether you are applying it to financialservices, to gaming, or data manage-ment”, he felt.

But increasingly it is going to becomemore compliance led, Caruana predicted.He went on to point out that a problemfor international finance centres likeGibraltar was in having a legal profession

More laws and wider use of compliance procedures planned to limit risk on the Rock!

that wore two hats – one as part of theCourts and judicial system, rightly inde-pendent of government, but the other askey participants in the financial servicesector.

Caruana made clear: “The govern-ment would not wish to stray into regu-lation of the conduct of lawyers in theCourt room – that is for the judiciary,(although I think that could be put on amore statutory footing) - but it wouldwant to get stuck in to a greater degreeon those aspects of the financial centrejurisdictional reputation.”

And he made clear: “We continue toattach importance to client privacy, albeitwithin clearly established parameters andprocedures, regulated by law, and subjectto referral by the Courts.

Robinson took a different line to theChief Minister, pointing out: “Clientaccounts are a real problem when itcomes to bribery, corruption and moneylaundering.”

Arguing that the process of KYC -‘Know Your Client’ - is insufficient intoday’s climate of smart criminals,Robinson said: “You have got to knowyour client’s client – and then somemore”.

“If the client is a lawyer, how do youfind out who his client is? And that’s areal danger. They will always protectclient confidentiality.”

Regulator Killick, a barrister andmember of the New York Bar, neverthe-less emphasised: “There will be enhanceddue diligence checks on individuals wish-ing to do business here in Gibraltar”.The move will be from light touch regu-lation of the last six years, “to a newdynamic, robust response.

“We will continue with on-siteinspections, but they will be more intru-sive in the way they are done: I don’t likethis, but it is necessary. We have not onlyto be clean, we need to be seen to beclean.”

It was inevitable that there will beenhanced checks on due diligence. “Adue diligence check, with a copy of apassport and a Utility bill (especially ifit’s in a foreign language), is not enough.You need to know where the money hascome from”, Killick asserted.

COMPLIANCE


Moves to achieve greater control and regulation of awider range of business in Gibraltar are likely in a bid toensure the jurisdiction’s reputation as “a modern, inter-national finance centre” is fully protected.

Businesses involved with the GibraltarPort need a broad based users’ council torepresent their interests in discussionswith The Port Authority on operatingissues and future investment,according to some who fore-see growing competitioncoming from nearby Spainand Morocco.

An existing PortAdvisory Council of eightpeople appointed by PortsMinister Joe Holliday, act ashis “sounding board”, butsome people feel that the Council doesnot adequately represent the wide rangeof businesses involved, particularly in theservice sector.

Concern at the potential impact ofthe new Tangier Port now being built wasexpressed by Danny Gabay, chief execu-tive of Redwood International, a logisticscompany formed 16 years ago from theformer A Mateas family shipping agency.

Redwood, with eight offices - at theairport, in the Port and at customs entrypoints either side of the frontier - twowarehouses and a fleet of eight vehiclesand plant equipment, claims 60 per centof a local marine market shared by fivebusinesses.

More competitive“We are involved also with Algeciras Portand know that it is becoming more com-petitive, which could be at the expense ofGibraltar, but even Algeciras is concernedat Tangier’s growth”, he says.

Originally a logistics service, mostlyfor ships’ spares within Gibraltar, two

years ago Redwood became associatedwith the international UPS logistics andthat changed the dynamics of the operation.

“Margins for marine sparesdelivery work are tight”, Gabaysays, and speed is essential.

“Often there are only twohours after docking to deliver toships from the airport or ware-houses – and new or return-for-repair parts are trans-shippedalmost anywhere in the worldusing Gibraltar and nearby air-

ports in Spain.”Since relations with Spain have

thawed and the frontier opened up inrecent years, much of the equipmentneeded for vessels now arrives by roadand with this in mind Redwood in 2006opened a 800 m2 warehouse operation –three times the size of his Gibraltar portsite at North Mole - in La Linea as ANTLogistics.

Gabay will this Autumn move to anew warehouse doubling the size of hispresent La Linea operation, that also willbe capable of handling dangerous goods,extending his six year Gibraltar expertisein this area with qualified staff capable ofhandling batteries, paints, cleaning chem-icals, etc, by air as well as road.

“The next nearest dangerous goodswarehouse is at Seville, so we will beoffering a new service and already wehave been offered bunkering change tostock and supply related contracts”.

Instinctively, Minister Holliday sug-gests that port-related businesses “havenever had it so good”.

He told Gibraltar International that

the near doubling of port vessel chargesand significant increase in trade madepossible through provision of moreanchorages had both boosted ship agents’commission, and the income of othersuppliers who provide essential marineservices.

IntelligenceAgreeing that the additional Easternanchorages are “one of the best decisionsGibraltar has made” Gabay says localcompanies can service them well. But heinsists: “We need to know what ourneighbours are doing and how we canprotect our business”.

Gabay thinks the government shoulddo more to promote the logistics aspectof the Port service to cruise operators andfor bunkering, because it makes goodsense for vessels to make use of the fullrange of services available whilstanchored in Gibraltar waters.

“It is not my place to tell the marinesector how to organise itself as a pressurebody, but it seems to me that the oldGibraltar Shipping Association should bere-formed to ensure all aspects of the Portoperation have an opportunity to con-tribute a view”, Minister Holliday said.

Meantime, he notes: “We want togrow the business and we want to grow ittogether. My job is to provide the envi-ronment for the Port to grow”.

With marine work accounting for 45per cent of current business, Redwood iswaiting to move from a cramped opera-tion adjacent to the existing airport ter-minal to smart new premises in thereplacement building from next year.

Redwood has been involved infreight forwarding and transport opera-tions, including hire of the first 500 toncrane to be imported into Gibraltar tocarry out repairs onboard a satellitelauncher.


MARITIME

Robinson, an expert onorganized crime, fraud andmoney laundering, declared.

The new UK Bribery Act,under which Individuals andcompanies can be prosecuted,represented the single mostgreatest shift for a century inthe country’s corporate legis-lation, declared Robert

Mitchell, head of enhanceddue diligence in Europe,Middle East & Africa forWorld-Check, a global infor-mation organisation assess-ing, managing and remediat-ing financial, regulatory andreputational risks.

Introduction of the law,Mitchell said, was the result

of OECD pressure for the UKto get into line with interna-tional best practice and“today, the Bribery Act is thegold standard of anti-briberylaws, because the UK had tobe seen to be serious aboutcorruption and bribery – andpreviously it was not.”

Courts no longer need to

prove intent to be corrupt,the new legislation goes “aquantum leap beyond com-pliance”, Mitchell explained.The law makes it a corporateoffence not to prevent bribery– “which means having theright procedures in place – it’slikely to be the only form ofdefence”.

Protecting reputation Continued from page 6

Tangier challenge prompts unitycall as logistics firm bridges border

that Gibraltar was closer toEurope than away from it. Ithas a reputation which is out ofdate - it has a good regulator. Itis the same as being inLuxemburg or Dublin.”

GFIA held a select seminarfor high level hedge fund con-sultants – people who advise onhow and where to set up funds– at London’s Gibraltar Housein June. "We found people-much more willing to listen tothe Gibraltar story than theywere 18 months ago, becausethey are getting the informa-tion validated by a much widerrange of other sources,” saysJames Lasry, GFIA chairman.

Seminar attendance at 33people was more than twicethat expected.

“The UK budget applyinga top rate 50 per cent personaltax and proposing changes toCapital Gains Tax rules, pro-vides an incentive to considerGibraltar with its advanta-geous tax system, even whencompared with Swiss cantons

that have been highlighted aspotential new homes forfunds”, concludes Lasry.

Quality of lifeIndeed, Burren’s McGrathanalysed finance centres usingwide criteria, including thelegal system, EU membership, asupportive local professionalnetwork and government, fis-cal issues at the corporate andpersonal level, transport linksand lifestyle.

With an investment teamof three, supported by an assis-tant and operations staff,(some recruited locally),McGrath points out thatGibraltar “promises a goodquality of life - most of myteam have young children andaccess to good schools isimportant”.

GFIA’s conference,“Gibraltar: The alternativefund jurisdiction in the EU -Establishment and re-domicili-ation opportunities” wassparked by the EU Alternative

Investment Fund Managers(AIFM) Directive, which willtightly regulate the activities ofhedge funds and private equityand investment trusts.

The Directive - nowexpected to be approved inSeptember after earlier failureto agree the detail - requires EUfunds to comply with possiblerestrictions on leverage andinvestment strategies and anumber of other aspects, butmost controversially placesconditions on investments in funds from non-EU jurisdictions.

The move was opposed bythe UK sector on the basis thatit singles out hedge funds forspecial treatment and “imposes

controls and burdens that itdoes not place on other finan-cial market participants”.

And Hilltop’s Simon warnsthat the Directive “has thepotential to impact on our for-ward planning.”

Lasry, says:”As a fundslawyer, I too think the Directiveis unfair, but as a Gibraltarfunds lawyer I think it istremendous news for us.

No tax to pay“Within Europe, because thepresent regulatory and taxissues are too onerous, thereare effectively, only four placesto set up a hedge fund –Dublin, Luxembourg, Maltaand Gibraltar. Theoretically,they can be established else-where, but the processes are solong-winded,” Lasry explains.

The idea is that thereshould be no tax on the funditself, because investors pay taxon profits in their own coun-tries, he adds, and “you can dothis in a jurisdiction, likeGibraltar, where there is no taxto pay on the fund”.

A small jurisdiction likeGibraltar can afford to makeregulation appropriate for


Continued page 18

FUNDS

Hilltop FundM a n a g e m e n t ,which hopeseventually toraise US$500m to

invest globally in a portfolio ofhedge funds, reportedly madeits decision after looking atwhat Dublin, Luxembourg andMalta had to offer.

Andrew McGrath, whohas established his new hedgefund business in Gibraltar withthe launch of his US$500mBurren Global Arbitrage Fundexpects to increase investmentby 50 per cent in a year, andconsidered a number of otherjurisdictions, including Geneva,Monaco, Ireland, ChannelIslands and Malta.

The funds coups for thejurisdiction come just as theGibraltar Funds andInvestments Association(GFIA) has stepped up its bidto attract interest from fundmanagers. The aim is to buildon the five fund-of-hedge-fundsalready in Gibraltar and also toattract asset managers.

“After a thorough analysisof the available options it wasquite clear that Gibraltar wasthe optimal choice”, he says.

Most suitableHilltop, which began inJanuary with US$10m assetsunder management, usedHedgeStart, one of the mostprominent consultancies to do

its research and suggestedGibraltar as being most suit-able.

Trevor Simon, joint Hilltopfounder, told GibraltarInternational that the assess-

ment process was “lengthy andcomprehensive and took in awide range of factors”.

Some of the more impor-tant considerations wereHilltop’s relationship with localservice providers, particularlyHassans lawyers and HelveticFund Administration, and theircost base, tax treatment of thefund and Gibraltar being with-in the EU potentially to enablepassporting, and convenienttravel and time zone for aLondon operation.

Founding partner andportfolio manager for Hilltop,Rory Hills is reported in trademedia as saying: “We weighedup the options and likedGibraltar and Malta. We felt

FUNDS


Funds coups as advisors crowd to hear jurisdiction’s benefitsTwo new London hedge fund managers have chosen Gibraltar, rather than other larger and possibly more established finance centres, after “extensive research”. They are the latest in a series of moves that will help boost Gibraltar’s funds sector, asRay Spencer finds out.

London-based Ballance Capitalto set up in Gibraltar two yearsago to specialize in the propri-etary trading in the alternativeinvestment sector.

Burren’s principals howev-er, are based solely in Gibraltarbringing value added kudos-from having both the mind andmanagement of the fund domi-ciled within the territory.

At the same time, Burrenhas shown real confidence inthe jurisdiction by not takingthe usual route for hedge fundsof starting out in the UK.

Although, the Burren Fundwill be located in Malta, thefirm will pay taxes on its suc-cess in Gibraltar.

In yet another develop-ment, a new fund of hedge

funds has been established in aGibraltar Protected CellCompany (PCC) by London-based Hilltop FundManagement, which hopeseventually to raise a similarUS$500m to invest globally.

As Gibraltar Internationalwas going to press it was alsosuggested that another insurerwas moving operations to TheRock, where more than 60insurance companies are based.

The growth in Gibraltar’sinsurance market in recentyears, along with increasingdemands for specialist advicerelating to the EU Solvency IIDirective have promptedMazars Actuaries andConsultants, a UK-based actu-arial arm of internationalaccountancy firm Mazars, to

open an office on the Rock.“Few of these companies

have an in-house actuarialresource” says Paul Tysoe, whofor six years has been executivedirector at Zenith Insurance inGibraltar.

Fresh initiativeHowever, the independentGFCC - made up of representa-tives of eight local professionalorganisations, includingbankers, accountants, lawyersand insurers – was formed toadvise the government onissues and is exploring a freshmarketing approach.

Revealing the initiative,Nick Cruz, re-elected as chair-man of the Association of Trustand Company Managers(ATCOM) told GibraltarTelevision: “Hopefully, overthe next few months we will

consult with, and come to gov-ernment with a sensible mar-keting strategy and hopefullythey will be interested in it andperhaps contribute to it finan-cially.”

He explained: “Whilst weall do our own individual mar-keting efforts, we have not real-ly got together on it. The ideais to do something where wecan work together to promoteGibraltar.”

Still more neededThis would “actually putGibraltar on the radar, whereperhaps it is not so now”, hesaid. But still more would beneeded.

“We still have high levelsof personal tax and have tocouple low corporate tax andlow personal tax. Hopefully,we can do so shortly …..

because one without the otheris not that attractive and itneeds to be done within a shortperiod of time – a couple ofyears”, Cruz maintained.

This package would attractcompanies and their staff tochoose The Rock, he saidwhilst acknowledging thatCaruana had promised to alsolower personal taxation.

In the meantime, JimmyTipping, Director of the government’s Finance CentreDepartment, is pressing aheadwith organising the annuallunch for City of London and

business contacts at DrapersHall on 18 October to coincidewith London’s Gibraltar Daycelebrations.

Tipping is also planning aFinancial Times business sup-plement on Gibraltar to coin-cide with the event, when over270 people will hear ChiefMinister Peter Caruana give anupdate on the jurisdiction’seconomic and businessprogress.

Nevertheless, whileGibraltar’s profile amongstworld finance centres may notbe as high as the Channel

Islands, Cayman and theBritish Virgin Islands, it stillcommands considerablerespect!

In top tenAccording to the GlobalFinancial Centre Index (GFCI),which over more than threeyears monitored opinions ofthousands working in theworldwide finance sector,Gibraltar is amongst the topten ‘offshore finance centres’.

The last GFCI report pub-lished by the City of London inMarch, showed Gibraltar as a

“transnational specialist”finance centre, positioning thejurisdiction behind Jersey andGuernsey, but ahead of Malta.

That was considered agood result, given that theChannel Islands have been pro-moting their jurisdictions forlonger and more intensely thanThe Rock has been able to do.

Gibraltar has also beenreferred to as a “small interna-tional finance centre”,although Caruana has beenreferring to the jurisdictionnow being an “onshore financecentre within the EU”.

"More are now willing to listen" says James Lasry, GFIA chairman

Andrew McGrath is looking to grow his$500m hedge fund by 50% in a year!

After a thorough analysis of theavailable options it was quite clearGibraltar is optimal choice“

”Putting Gibraltar “on the radar” from page 7

Experienced or High NetWorth investors, where thereis a lesser requirement forprotection of individuals, butgreater flexibility.

Gibraltar already hasUS$4-5bn in funds and theamount is growing at the rateof 20 funds a year, Lasrynotes.

“I would not be sur-prised to see a 50-100 percent growth once theDirective comes into force ina year or two – possiblymuch greater,” he enthuses.

The Directive will meanthat European professionalhedge funds can be brandedas AIFM and passportable toprofessional investors any-where in the EU, in the sameway as UCITS has done forretail funds. That removesthe need to comply with indi-vidual EU countries’ differingrules on funds and enables aone size, fits all approach.

Other territories havebeen marketing their offer-ings hard in the last sixmonths and this is the firsttargeted campaign fromGibraltar, “which has limitedresources”, Lasry notes.

The London seminarheard presentations fromMarcus Killick, chief execu-tive of Gibraltar FinancialServices Commission on ‘thejurisdiction for regulatedfunds’, and two lawyers -Albert Isola, a partner atIsolas on ‘redomiciliation offunds’, and Melo Triay, man-aging partner at Triay &Triay, who promoted‘Gibraltar as an attractivealternative for fund man-agers’.

Dr Nick Terras, a leadingindependent consultant

in investment management,spelt out the ‘opportunitiesthe jurisdiction presents inEurope under the new AIFMumbrella’.

A funds and structuredfinance lawyer, Dr Terrasdrew on his experience in theapplication of alternatives’strategies within the EU regu-lated manager and fundsarena for investment by bothinstitutional and retailinvestors within the EU, the

US and elsewhere.In a second June initia-

tive, GFIA attended the four-day GAIM Internationalinvestment conference forhedge funds in Monaco, witha stand and support of thegovernment-run FinanceCentre Department.

The largest concentration ofhedge funds outside of theEU is believed to be in theCayman Islands, but there it’sunlikely there will be anyearly move by managers insuch jurisdictions to seek re-domiciliation.

Continuing uncertaintyover how the EU Directivewill operate and measuresthat can be taken by non-EUfinance centres to cope withthe Directive will lead to adelay in decisions, believesJames Lasry, chairman of Gibraltar Funds &Investment Association.

The Directive’s “thirdcountry rules” will establishhow funds based outside ofthe EU can be marketed toinvestors within it.

And crucially, it willdefine the circumstances inwhich investors within the

EU may buy funds domiciledoutside of it!

However, CaymanPremier McKeeva Bushreportedly is unconcerned,declaring: “Under the direc-tive, the marketing of fundsfrom non-EU countrieswould be allowed if certaincriteria are met.

“As it currently stands,these criteria include equiva-lence in relation to regulatoryoversight, anti-money laun-dering and countering terror-ist financing, and compliancestandards.

They also involve havingregulatory and tax informa-tion exchange agreementsbetween relevant non-EU andEU authorities, as well asmarket access for EU basedfunds,” McKeeva said.

A similar approach hasbeen taken by Guernsey

Finance chief executive PeterNiven, who maintained that whatever rules are finallyadopted, the Island willremain a leading fund domi-cile.

“Under the latest pro-posals any third countryhedge fund or private equitygroup will be able to gain anEU passport if it complieswith the new rules and itshome country applies globalstandards,” said Niven.

“We certainly believeGuernsey meets all the rele-vant criteria, not leastthrough our long standingcommitment to adopt inter-national standards on regula-tion, transparency and infor-mation exchange.”

At the end of December,the overall value of funds under management and administration in

Guernsey stood at more than£184bn and they were promoted or sponsored byleading institutions in 45countries.

But Lasry asserts:“Anyone setting up a newfund aimed at the EU area,will do so in one of the keyjurisdictions such asGibraltar, to benefit fromAIFM.”

Industry sources believethat it will be some timebefore any third party juris-diction is approved to havetheir funds passportablewithin the EU.

And Hedge Fund Review magazine declared in December: “As moreinvestors look for safe, well regulated jurisdictions,Gibraltar appears an attrac-tive alternative within theEU”.

FUNDS


Jurisdiction benefits from page 17

Waiting on ‘third country’ rules

Funds reveal strategiesHilltop’s all-weather fund is investing in some 15 underlyinghedge funds, diversified by investment approach and geography.Although fund-of-funds are out of favour for some because ofpoor performance, Hilltop says it will have a bottom-up invest-ment approach focused on fund selection rather than the moreusual, top-down asset allocation.

With a minimum investment of €100,000, the Fund has anaverage target return of 12 per cent a year net of fees over athree year period.

Burren however, says the types of opportunities that it seeksto profit from within the equity and equity derivatives marketsglobally are often overlooked by its peers.

“Unless a situation is complex it doesn’t interest me.Although we very rarely take positions in anything but highly liq-uid large cap companies the type of arbitrage opportunities thatwe exploit are not hugely saleable, which logically limits theamount of capital we are able to invest in each opportunity, butalso in the fund overall”, Andrew McGrath fund manager pointsout.

That, combined with a 9 year track record of successfullyexecuting this same strategy within the large investment banks,is what McGrath believes has excited interest in his strategy.

Described as “the gentlemanbookie”, Essex-bornChandler did the ratherungentlemanly thing oftelling the UK government

exactly what he thought of its 9 per centbetting tax by relocating his whole oper-ation to Gibraltar in mid-1999.

It was a defining moment; a movethat within months prompted other lead-ing bookmakers to follow suit andbrought about the birth of a new andvaluable sector of the Gibraltar economy– on-line gaming.

The whole thing was sparked by arealization that high-rolling Far Eastgamblers wanted to place bets on the1994 World Cup without paying the tax,which the then Chancellor, GordonBrown, removed in his next budget. Butthe damage was done!

“I got a phone call from my Londonoffice on a Friday to say someone want-ed to place a £1m bet in cash. Hedeposited £750,000 with us and thenarranged to meet me at Newbury RaceCourse to place bets on the first game”,recalls 59 years old Chandler.

Armed police raidShortly after, armed police raidedChandler’s office and took the money,while the Hong Kong businessman wasstopped at a motorway road block andtaken to Dover Street Police Station. Hemissed having the bet, but his lawyerssoon established he was legitimate.

“It was the biggest thing that hap-pened to me”, and he realized the hugeinterest in betting from outside of theUK.

Victor Chandler (VC) bookmakerstook bets from a great number of Chinesepunters for that World Cup. “It got me

on my bike to look for a jurisdictionwhere I didn’t have to pay betting tax”,he explains.

Chandler went to the Bahamas,Bermuda, Jersey and Guernsey but theyeither also had a betting tax or wouldn’tallow an offshore person to operate andin the Bahamas, the telephone system andthe time difference was not suitable.

The solution was mooted unexpect-edly over lunch with fellow bookmakerCyril Stein, a family friend who had justretired from Ladbrokes, which had asmall operation in Gibraltar.

“He told me there was a floatingbookmakers’ licence that belonged toAlex Dendeniotus, who had not includedit in the sale of his local casino. I was ona plane to Gibraltar and secured thelicence in a matter of days just prior tothe start of football’s Euro 96 competi-tion”, Chandler says.

In the few weeks available, VC wasonly able to get ten telephone lines, so 40mobile ‘phones were used as backup.Chandler secured work permits foraround ten young Chinese to answer thephones, and bought a team fromLondon, as well as hiring a few local peo-ple.


Unexpected happenings and sudden realizations –“blinding flashes when the light comes on” – havemarked out the success of Victor Chandler’s gambling business, but making Gibraltar his basewas a winning certainty, as he explains to RaySpencer.

World Cup decidesbookmaker’s fortune

Meantime, Chandler set off to tourHong Kong, Singapore and Malaysia,drumming up customers and establishingmarketing offices in Hong Kong andBangkok, building a 60-strong team.

“Our business was focused almostentirely on the Far East – over 80 per cent- but there were a few Italians and privateclients I knew based outside of the UK”,he admits.

But VC still had a big UK operationwhen a chance remark by Chandler’sthen partner, Carol, in early 1999prompted another sudden realization.She reasoned that if Irish bookmakerscould take bets from people in the UK, hecould take them in Gibraltar!

“It was fantastic - the light came on.A QC’s legal opinion in the UK con-firmed it was OK, so I made plans thereand then to move the whole office to TheRock in May”, Chandler says.

He managed to keep the whole oper-ation secret. VC already had a smalloffice on the first floor of Leanse Place,and when some 18 of the 30 London staffrelocated, the firm took the whole floorand put in 50-60 people initially, mostlyGibraltarians working alongside theChinese team, but built that to 120 tele-phonists, recruited from everywhere.

Technology greatestchangeThe business has changed radically in thelast 10 years. The Hong Kong andThailand offices closed when local lawsbecame restrictive and since then thefocus has been on Taiwan and main landChina, going out from Kuala Lumpur.

“The greatest change for the businessis in technology- 96 per cent of our busi-ness is now done on the internet”, hereports. VC sold 60 betting shops in theUK and now has only six in a joint ven-ture with an individual.

“I see betting shops dwindling overthe next 10 years in the UK, because theaverage age of people in betting shops isolder, and the younger generation is notfrightened to use the internet and areused to paying for things on-line,”Chandler reflects.

VC previously was “a specialistoperation dealing in high rollers –employing 40 or so people in Londonand a huge on-course betting operationjust to service around 2,000 customers”.

PROFILE

Continued P22

Today the firm employs 280 peoplein Gibraltar, including eight of the origi-nal London staff.

Chandler admits: “We’ve shrunkfrom our peak of 350 people, because themajority of the business is on the internetand we no longer need banks of tele-phone operators. We try every incentive –other than with VIP customers – to makepeople bet on-line, because it’s so muchcheaper for us.”

Riding outHe now gets 80 per cent of profit from 6-7 per cent of clients, because they are biglosers.

“We specialize in recruiting people –many of whom are now my personalfriends – who if they lose, it’s not going toaffect their lives, it’s a hobby. I don’twant to burn people out quickly, I wantthem to be customers with us, for a longtime and I’ve still got customers who betwith my father from 1974,” Chandlernotes.

He reports that the average bet in theindustry is now £43, but it’s much lower

if just two other companies are removed!The product has changed too. “Half

of VC business now is in poker, casino,slot machine and virtual sports games;the balance is football and horse racing interms of number of bets, but racingaccounts for 75 per cent of turnover.

However, the World Cup that hasjust ended was expected to change thecompany’s figures dramatically. Whilstbeing interviewed, Chandler sanctionedon the telephone two £50,000 bets ongames from Irish punters. He was notgoing to watch any matches however,“we are too busy here and there’s myfavorite Royal Ascot to attend”.

He doesn’t see the current UK eco-nomic hard times giving a boost to bet-ting shops. Turnover has continued togrow because of other territories, whilethe UK business has generally sufferedand remained flat. “Some of our biggercustomers are resting, because theyhaven’t got the disposable assets theyused to have”.

And VC has seen growing competi-tion in some European markets fromother firms who diverted resources from

the US when they were prevented fromoperating there. But he remains opti-mistic.

France has just licenced on-line gam-ing companies, Spain will follow nextyear, he says, and in South Africa the bethas to be taken on servers based there.“We feed all the prices for an event fromhere, so we charge the subsidiary compa-ny for the services we provide and paytax on that. We don’t foresee havingtraders everywhere in the world”,Chandler says simply.

He only occasionally takes bets per-sonally “when out to dinner with friendsor at the races - I’m quite good at theodds for horses, but not very good at soc-cer” – but still gets a thrill sitting in thetwo vast trading floors in Gibraltar.

He started out training to be a chefin Switzerland, but returned to the UKwhen his father died to find the businessnearly insolvent, because of a combina-tion of things but mainly because wewere going through a big recession in1974: there was no money around.”

Aged 22 he started taking bets “and


PROFILE

bookmaker’s fortune Continued from page 21

Continued P24

it took me three years to get anywhere,before going fully on my own. A goodbookmaker has got to have the basic skillof understanding percentages and a feelfor betting. You can’t do it unless you gothrough the learning curve; I have madesome big losses”, Chandler concedes.

Further growth & stayingHe expects there to be further growth inGibraltar on-line gaming, with consolida-tions in the next five years, “once wecome out of the dark days of recessionand the licencing situation in Europe hasbeen resolved.” Chandler believes the USwill again open to foreign gaming firmsin the next two to five years. “They needthe revenue – it’s another way of raisingtax” he observes.

Gibraltar’s Chief Minister PeterCaruana “grasped early on the potentialof having a new industry sector to growhere. I was the only one not happy thathe granted licences to other betting oper-ators, but one has to be pragmatic”, heintones with a wry smile.

VC is committed to staying inGibraltar and not looking for suitors, aswas rumored a couple of years back.

“The present market is not a goodtime. The multiples we’d like to achieveon a sale or a float is not there at pres-ent”, remarks Chandler, who declined tocomment on speculation about the pri-vate company’s £350m value.

Nevertheless, last year’s SundayTimes Rich List put his then personalwealth and family fortune at ninth equalamong bookmakers at £150m.

With two young children from hiswife, Susan, and a 14 years old step son,“I spend less and less time away, and nowgo to the Far East twice a year, when Iused to go six times, and will via SouthAfrica, as well as visiting London everycouple of months,”, he suggests.

Mobile ‘phone potentialHaving owned property at the exclusiveSotogrande Alto urbanisation since 1998and living there from a year later, he nowowns a 33 hectare Stud farm furtherinland, where he keeps 23 horses and is

building a nine bedroom villa: severalexisting cottages in the grounds arewhere high-spending punters and otherfriends stay.

He is inspired by young people withideas and “I like to mix with the IT direc-tor and the product development peopleand all the time looking for the newpoker.” On average, he gets two projectpresentations a week from outside par-ties, but has not seen a good one this year.

“I see a huge development in mobilephone betting, although the technology isnot right yet, to my mind it certainly willhappen. We are working on it now to getthe perfect solution – it is an IT chal-lenge”, he notes.

Reflecting on his relocation toGibraltar, Chandler says: “I don’t thinkyou ever realize the impact of the move atthe time, because we were totally focusedon what we were doing. It did seem atthe time that anything was possible, butno-one forecast the growth in internetuse and how it would change, not onlythe betting industry, but our lives.

“Gordon Brown did us a favour.”


PROFILE

bookmaker’s fortune Continued from page 22

hedging side of the business.“In Gibraltar we live in a

dual currency environment andtherefore, many ofour businesses areexposed to currencyfluctuations on aday-to-day basis.”

Daylespecialises indeveloping foreignexchange riskmanagementstrategies andbelieves the Bank’scommitment to understandingits clients’ foreign exchangerisk management needs makesit possible to “create solutionstailored to those businessneeds.”

Poolside diningGibraltar’s iconic Rock Hotelhas introduced alfresco diningat its open air poolside for thesummer, following the successof the concept last year.

The set three course menucosts £24.95 and is availableevery day, building on theprevious weekend only trial,and has a wine selectionspecially designed tocomplement the relaxed, open-air evening environment.

Business crimeChristian Rocca, managingpartner of Gibraltar’s oldestlaw firm, Isolas, hasunexpectedly foundhimself countryrepresentative ofFraudNet, a globalnetwork of lawyersspecialising intackling businesscrime.

“I don’t knowwhy they chose me,but it seems our profile andexperience was what theyneeded”, he says, “but havingpreviously been part of asmaller similar network, Ifound this new group to beparticularly effective.”

FraudNet is operated by

Commercial Crime Services(CCS), part of the InternationalChamber of Commerce, and

involves companiesengaged ininternationalbusiness, the legalprofession and lawenforcement, dealingwith shipping,transport and trade,banking, insurance,intellectual propertyand information

technology“We have done quite a bit

of bank-related work and beingable to deal with specialists youknow in other jurisdictions inasset tracing, for example, is auseful addition to our service”,believes Rocca, who has beenIsola managing partner since2007.

He regularly advises bankson day to day matters as wellas representing leading UK, USand Swiss banks in financing

and re-financingprojects involving anelement of GibraltarLaw.

The world-widenetwork of legalspecialists aims tohelp clientsinvestigate and takeaction againstfraudsters in foreign

jurisdictions.

Political freedomTwo retired UK politicians,Conservative MP and formerTory party chairman, MichaelAncram and AndrewMackinlay, who gained a

reputation as a ‘grandinquisitor’ during his 18 yearsas a Labour MP, are in line toreceive the Honorary Freedomof the City of Gibraltar.

“Both men have, overmany years shown greatsupport to the aspirations andinterests of the people ofGibraltar and have continuallysupported Gibraltar in the UKParliament”, a governmentstatement says.

Proving popularJersey-based Whitmill Groupreceived so many enquiriesabout European opportunitiesthat principal Don Wijsmullerdecided to open an office inGibraltar a year ago. Now he’sbeen proved right as a €15mCayman Islands hedge fund hastransferred its administration

and Whitmill expectsmanagement to follow beforethe year end.

Minette Compson,managing director of WhitmillFund Administration(Gibraltar) reveals more fundsfrom Cayman and BVI arepoised to relocate to the Rockspurred by a new EU Directivethat enables the easypassporting of funds.

“People hadn’t been awarethat we were open to funds”,she notes at the business’ firstanniversary reception togetherwith sister firm, Whitmill TrustCompany (Gibraltar), run bymanaging director WayneMeenagh.

The local firm has alreadyattracted three ExperiencedInvestor Funds from the UK.

Lebanese strengthAs foreshadowed in GibraltarInternational early this year, aGibraltar branch of the privateBanque Audi (Suisse) sa hasbegun operations initially toconcentrate on treasurymanagement and was launchedin June at a reception attendedby Chief Minister PeterCaruana. Bank generalmanager, Istvan Nagy and hisdeputy, Mrs Christiane Audi,underlined to guests thestrength of operations,revealing that parent AudiSaradar Group, the first andlargest private bank inLebanon had US$26.8bn intotal assets, US$ 23.2bn ofcustomer deposits and US$2.2bn of shareholder equity.

Banque Audi (Suisse) hasits head office in Geneva withmore than 30 years ofexperience in investmentmanagement, but its Gibraltarbanking license is unrestricted.

Local branch managerRaymond Joubaud was afounding member of theGibraltar Fund and InvestmentAssociation (GFIA), whileassistant manager MartineZerourou joined the bank in2004.

Sad loss of directorEuropa Trust CompanyManaging Director, FrankOlivier Hay, died suddenly inearly June in Geneva, havingbeen unwell for some time.

The funeral was held in theCathedral St-Pierre, reportsMark Bridge, managingdirector of Europa Trust(Gibraltar), which is celebratingits 25th anniversary.

An enthusiastic jazzmusician, he provided the Cityof Gibraltar with the beautifulSteinway piano now in theConvent Ballroom and wasinstrumental in organising andpromoting the performance bySir Elton John as part of thejurisdiction’s tercentenarycelebrations in 2004.

PEOPLE AND PLACESPEOPLE AND PLACES

&AroundAbout

Going againWith “a tear in one eye andthe sun in the other” is howThomas West Olsen describedhis feelings at leaving hisposition as chief executive ofCredit Suisse (Gibraltar) totake charge ofNordic Marketsfor CreditSuisse PrivateBanking inZurich.

Danishborn Olsen leftGibraltar oncebefore. From2003 he spenttwo yearsestablishing a Jyske Bankbranch in France as generalmanager, before taking chargeof the Swiss bank’s Gibraltaroperation.

With wife Suzanne, hefirst arrived in Gibraltar in1993 as an investment advisorfor the Danish bank,advancing over 10 years tobecome business developmentmanager.

Leaving again is “quite achallenge - I feel very much asthough this is my home, as allthree of my children – nowaged four to 14 – were bornhere”, he says.

With around 30 people inSwitzerland organised into fourteams for each of the NordicCountries, Olsen is alsoresponsible for a further 10people in a similar Londonteam.

From January, he will addanother Nordic-focused groupin Luxembourg as well aslooking at opportunities inother countries, includingSingapore to expand his multi-shore operation.

“In every country we aimto be the market leader and mytask is to bring structure to ouroperations in these areas and achanging focus and strategy”,he explains, noting also thathe’s opening a branch inSweden too. With typical

understatement, he adds:”It’svery much a growth area forus”.

Olsen remains on theBoard of Credit Suisse(Gibraltar), so will return tothe jurisdiction on occasions,

but at the time of goingto press his successorhad not been named.

“Today, we have55 employees from 12nationalities coveringour portfolio of wealthyPrivate Banking clientsand we have seensignificant growth inassets and revenuesover the last five years

as we continue to grow ourbank in Gibraltar”, says Olsen.

In the meantime, his roleas President of the GibraltarBankers’ Association is beingfilled for the interim until theJanuary annual meeting byRoy Clinton, chief executive ofanother Swiss private bankingenterprise, Bank J Safra(Gibraltar), who held thepresidency role five years ago.

Returning fromJerseyHaving joined Royal Bank ofScotland Group Treasury &Investors Solutions team inJersey two years ago,Gibraltarian Dayle Rowbottomhas returned home to becomeTreasury Associate for asimilar NatWest team focusingon foreign exchange riskmanagement for corporateclients.

Educated locally, Dayleobtained an honours degree ineconomics from the Universityof York and holds theSecurities and InvestmentInstitute Level 3 certificate inSecurities and Derivatives, aswell as the ACI DealingCertificate.

As Gerald Rodriguez,Director, Corporate TreasurySolutions, comments, Dayle’sChannel islands experience willbe used to promote the FX


Dayle Rowbottom

Christian Rocca

Thomas West Olsen


bedrooms104 Bedrooms and suites in a colonial

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conference facilitiesFull upgraded conference facilities

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weddingsThe Rock is an ideal wedding venue

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wisteria terraceThe Wisteria Terrace for lunches,dinner, barbecues, afternoon teas,evening drinks and informal dining

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Europa Road, GibraltarTel: +350 200 73000Fax: +350 200 73513

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14 On the QuayRestaurant

Since January, most Gibraltarproperty sales, rentals and sub-lets – for new and

existing buildings - need anEnergy Performance Certificate

(EPC) by law as part of the contract. Yet so far, only around 60 EPCs have

been issued, with a similar number beingprocessed.

EPCs take into account the waybuildings are lit, heated/cooled and usedand enable comparisons to be made onthe basis of the intrinsic properties ofbuildings rather than the user’s choice ofoperating patterns.

This effort with existing propertiesmirrors those being taken in planning andbuilding control where energy efficiencyof new or altered buildings is now beingtaken into account.

They are intended to allow occupiersto make comparisons on the likely energyrunning costs between similar sized prop-

erties through a simple grading system inthe same way as many domestic appli-ances are rated on energy consumption.“A” is best, with “G” being least effi-cient.

The cost of electricity, the means ofpowering just about all water and homeheating and cooling, represents a comparatively high element of buildingoccupancy costs.

Individual energy efficiencycost going publicUnlike the UK, the energy rating fromeach Gibraltar EPC soon will be pub-lished on a government website to aidpublic comparison – and to help identifycommercial and residential propertiesthat have not been assessed when proper-ties change hands!

There are around 10,000 residentialdwellings, of which more than half arerented and some 40 per cent are govern-

ment tenancies, but only those propertieswith at least 12kw of air conditioning orfuel derived central heating capacity areaffected. There is an estimated 94,000m2 of office space in Gibraltar, but noestimate of how many non-governmentindividual office spaces there are.

Of the 117 EPCs submitted by endJune, only two were for commercialspace!

“Our initial effort has been in theprivate sector where we expect to see thegreatest impact as this sector has thehighest proportion of air conditioning perpremises”, says Peter Soiza, senior envi-ronment officer.

Twelve government-recognisedEnergy Assessors from seven local firmshave been trained and are assisted byBuilding Research Establishment (BRE)software developed for UK non-domesticuse, adapted to apply to all types ofGibraltar property.

The EPC, with its recommendationson energy saving measures, is more far-reaching than similar reports in the UK.As a result of the work involved, the costof a Gibraltar residential EPC is consider-

ENVIRONMENT ENVIRONMENT

Scoring an “A” for energyin your next office or home

ably higher than the UK average of £80.Public authorities or institutions pro-

viding public services, with a total usefulfloor area of over 1,000 m2, need to pro-vide a self-assessment EPC-type reportthat must be prominently displayed in thebuilding. But these will not appear untillate this year after sufficient officials havebeen trained.

A total of £ 93,000 has been investedin the development of the EPC processover a period of two years.

No compulsionImprovement recommendations however,may not be always cost effective, and areadvisory.

“We are not going to rebuild all ofthe old premises and housing stock toachieve higher efficiency ratings; we can’tgo into retrospective mode,” Soiza notes.

At present, there is no set time inwhich those who receive recommenda-tions for improvements to their energyuse must implement, but EPCs must berenewed at least every ten years.

Catherine Walsh, who has a Masterof Environmental Technology degree

from Imperial College, London, hasworked for Gibraltar’s EnvironmentDepartment for the past 18 months, andis now energy conservation officerresponsible for the EPC scheme.

Her task is to improvethe thermal insulation of thehousing stock and raiseawareness of the legalrequirements, with the aim“hopefully of using lesselectricity and achievinglower emissions frombuildings”.

She targeted over 100lawyers, estate agents,contractors, architects anddevelopers – anyone withinfluence over buildings –to attend an initialFebruary seminar justafter the law came intoforce making EPCsmandatory. Less than half turned up!

Surprisingly slowFew of the 12 assessors, are yet busy -two had done none - when Gibraltar

International contacted them, and theyare less in demand than anticipated evengiven a ‘slow’ sales market.

Failure to comply can result in finesof £200 for dwellings and for commercial

premises up to 12.5 percent of the rateablevalue – with a £500 minimum.

Despite this, assessorJames Hughes, a charteredarchitectural technologistfor Sharrock ShandDesign, maintains “thatmany new rental arrange-ments get round the needfor this energy assessmentthrough managing agents orowners using their ownstandard agreements with-out the need to involve alawyer, as would be neces-sary for property sales”.

He’s even had vendors ask for anurgent assessment to produce an EPC justone day before completion, because theyhad been alerted to the need for the document at the last moment.



Akey international response tothe financial crisis has been tolook at how enhanced regula

tion and supervision of thefinance sector can prevent

similar crises, says Marcus Killick, chiefexecutive of Gibraltar Financial ServicesCommission.

Previously, whilst there was a pletho-ra of international standards - whetherfor banking, insurance, securities etc -enforcement has, at best, been patchy,with some of the most powerful jurisdic-tions being some of the worst culprits.

Standard setters had few, if any, teethand relied heavily upon consensus toachieve their goals. It was comparativelysimple to push for change in the so called‘offshore centres’, but quite a differentproposition to tackle the issues of super-vision of the US insurance market!

One way of resolving this has beento extend significantly the remit of keysupervisory monitoring bodies. The mostimportant of these is likely to be theFinancial Services Board (FSB).

The FSB replaces the FinancialStability Forum (FSF) to “coordinate atinternational level the work of nationalfinancial authorities and internationalstandard setting bodies, and to developand promote the implementation of effec-tive regulatory, supervisory and otherfinancial sector policies.”

Stability roleThe Board has a much wider remit, anexpanded membership and a broadermandate to promote financial stability.

A number of countries have morethan one body as members, the numberreflecting the size of national economies,financial market activity and nationalfinancial stability arrangements. TheUK, for example, has the Bank ofEngland, Financial Services Authorityand HM Treasury.

This breadth of FSB membershipmay cause logistical difficulties. With 70members there is a risk of delays andinefficiencies.

Key initiativesThe FSB has been tasked with a number

of key initiatives, one designed to encour-age adherence to international financialstandards, including identifying non-cooperative jurisdictions and assistingthem to improve.

The initial focus is on adherence tointernational cooperation and informa-tion exchange standards in the financialregulatory and supervisory area as partof a comprehensive framework that theFSB is putting in place for encouragingstronger adherence to international stan-dards more broadly.

FSB member jurisdictions arerequired to lead by example. They havecommitted to implement internationalfinancial standards, participate in inter-national assessments, and disclose theirdegree of adherence supported by period-ic peer reviews.

The FSB is following a far moredetailed and consistent approach forevaluating adherence to internationalcooperation and information exchangestandards in the financial regulatory andsupervisory area than the FSF did.

Show willingnessThe focus on identifying uncooperativejurisdictions is not restricted to sharinginformation; it also reflects the level ofwillingness and capability to apply thestandards now expected by the globalcommunity.

In the view of the FSB, the three keyfinancial regulatory and supervisory stan-dards are the BCBS Core Principles forEffective Banking Supervision, the IAISInsurance Core Principles, and theIOSCO Objectives and Principles ofSecurities Regulation.

The FSB has prioritised a pool ofjurisdictions to be further evaluated,based on their importance in the financialsystem and the available information ontheir compliance with the relevant stan-dards.

These undisclosed jurisdictions willbe invited to engage in a confidential dia-logue with the FSB to further evaluateadherence and identify ways to improve.

The FSB has also launched its firstcountry peer reviews. These focus on theimplementation and effectiveness of

Closer supervision to identify‘uncooperative’ jurisdictions

financial sector standards and policiesagreed within the FSB, notably throughthe follow-up to relevant recommenda-tions arising from a recent IMF-WorldBank FSAP.

Italy, Mexico and Spain will undergoa country peer review in 2010 andreports will be published once approvedby the FSB Plenary.

The FSB’s approach will be similar tothat of the IMF, forming an expert teamto engage in dialogue with the jurisdic-tion and, if needed, encourage theauthorities to request a new assessmentof compliance from the IMF/World Bank.

SanctionsOnce the FSB approves the report, it willconsider whether to list the jurisdictionas non-cooperative.

Given the acknowledged lack ofteeth in previous review processes, theFSB has established a “toolbox” of bothpositive and negative measures to pro-mote adherence to safeguard the globalfinancial system and to apply additionalpressure to improve a jurisdictions’adherence.

In particular, if one year after theapproval of the evaluation report a non-cooperative jurisdiction has not madesufficient progress towards adherence,then the FSB could call upon its membersto take further measures.

Apart from the FSB and other bod-ies and warning other financial institu-tions to be careful in conducting busi-ness with that jurisdiction, there is anescalating range of sanctions which, ifimplemented, would be effective.

FairnessHowever, whilst they may be invokedagainst smaller centres, the ability orwillingness to impose them against apolitically powerful jurisdiction, or onewhose economic wealth is vital to capi-tal inflows elsewhere, will be the first truetest.

The FSB will only succeed if it demonstrates willingness to act consistently and fairly. Its commitmentto transparency is a good start.

Its removal of the historic biasagainst offshore centres is, likewise, apositive indicator.

Let us await the first list of uncoop-erative jurisdictions to see if those indications provide tangible results.

REGULATION

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