Shrewd move by JTC
JTC was formerly known as Jersey Trust Corporation. It listed as a FTSE 250 company in 2018 and has since then integrated 15 acquisitions.
Last month, it captured interest with its acquisition of First Republic Trust Company of Delaware from JPMorgan Chase (JPM) for $21 million. JPM acquired the Trust Company as part of a rescue of First Republic Bank in May 2023. It has $9 billion of assets under administration and a dedicated team of trust professionals.
JTC has two main divisions: institutional client services and private client services. , which generated revenue of £165 million for the group last year and the private client services which generated revenue of £94.1 million for the group.
Rupert Hargreaves, writing in Money Week, said, ‘What attracted my attention to this deal was that JTC, a British firm, was buying a business from a large US financial institution. Usually, it’s the other way around.’
But this is to miss the point. Like South Dakota and Alaska, Delaware is the new offshore financial centre, hiding in plain sight. It is a shrewd investment to grow in this US state.
When JTC opened its doors for business in Jersey 37 years ago, offshore financial centres were booming following the lifting of exchange controls in the UK in 1979. This was the era when regulation stopped at the borders of countries, and money could move across the globe freely—hidden from view.
Governments saw offshore financial centres as places where money could be stashed, untaxed and undetected. The world has changed dramatically since then. The only place to hide your money - out of sight and free from detection is in the US!
In 2010 the US passed the Foreign Account Tax Compliance Act. This Act required foreign financial institutions to report on the foreign assets held by their US account holders or be subject to withholding on funds held in the US.
It was widely thought that these foreign financial institutions would shed their funds in the US rather than comply with such a demanding request which was not binding on them.
However, much to our surprise, the financial foreign institutions complied.
The Organisation for Economic Cooperation and Development (OECD) watched with interest. It also wanted information from foreign financial institutions about funds held offshore by their taxpayers.
In 2014, the OECD introduced the Common Reporting Standard (CRS) as the Automatic Exchange of Information as the information standard. Until 2014, the parties to most information-sharing treaties exchanged information upon request, which was ineffective in tackling tax evasion. All 38 countries of the OECD signed the Treaty, and information started to be exchanged in 2018.
Although countries like Jersey have little to gain from such an exchange, they were forced into compliance through threats of blacklisting by organisations such as the European Union. Being blackballed severely curtailed its competitiveness as a global financial institution.
One country remained on the old information exchange standard upon request - not automatically. The US receives information relating to its US citizens automatically from foreign financial institutions due to the compliance requirements of FATCA. It does not need to exchange information automatically with other countries—and so does not!
Within the US, some states, such as Delaware, like many offshore financial centres, have been eager to attract business to their jurisdiction by adopting suitable tax rates, legislation and appropriate regulations. They now have the edge over every other offshore financial centre, such as Jersey by not having to comply with CRS. This saves administration costs, but more importantly, is very attractive to people who for whatever reason, wish their offshore funds to remain private.
Although the move by Trust and Company Administration businesses to suitable US States in the US has been slow, it has and will continue. JTC is not just bucking the investment trend, it is following a very shrewd strategy.