Episode 56: Joe Field: Holland & Knight
Joe Field is the founder of today’s private client professional. He has his finger on the pulse, keeps up to date with emerging legal trends, and knows how to interpret them. Joe is a legend in his own time. It is, therefore, a tremendous honour to call him a friend and a great privilege to interview him on episode 56 of our ‘How To Keep Your Money’ podcast series.
00:01.62
carolinesclub
This is episode 56 of How to Keep Your Money. I'm Caroline Yarnam, a former private client lawyer specializing in international trusts and succession planning, a pioneer of family governance and a psychologist.
00:05.23
Joe Field
Thank you.
00:15.41
carolinesclub
I set up Caroline's Club for private client professionals worldwide, a place to win business, make money and market your services. Caroline's Club provides training and a community of like-minded professionals. I'm joined remotely by Joe Field, a lawyer and of counsel with Holland & Knight, a global law firm based in Miami. Joe is the founder of the modern day private client professional. He has his finger on the pulse, keeps up to date with emerging trends and knows how to interpret them. He is a legend in his lifetime.
00:51.08
carolinesclub
It is therefore a tremendous honor to call him a friend and a great privilege to interview him on our How to Keep Your Money podcast series. Joe, thank you for joining me today. You've won so many awards, authored so many articles and spoken at so many events, it will be tedious to mention them all. Suffice it to say you've won the Private Asset Management Outstanding Achievement Award in 2018 and the Founder Award of Outstanding Achievement by the Society of Trusts and Estates Practitioners.
01:18.44
Joe Field
Okay.
01:21.99
carolinesclub
Like me, you saw how the international private client industry responded to the lifting of exchange controls, which became law in the UK in 1979. In those days, money could flow freely between countries, but law enforcement stopped ah at the borders. Before we get into like what life is like now, maybe you can explain a little bit about what private client work was like then. Joe, welcome.
01:50.68
Joe Field
Thank you, Caroline. um I must say that introduction was over the top. ah I'm just a humble little man in my corner. Anyway.
02:00.76
carolinesclub
ah so
02:01.75
Joe Field
ah Tax and offshore jurisdictions were a very different subject 20, 30 years ago. To me, it was really the Wild West. Onshore, we had something called the State of India case, which basically said that one jurisdiction would not enforce the tax claims of another, which created some very serious problems. Tax evasion in most parts of the world, other than the US and the UK, was pretty much a sport. And other than the US and the UK, there was little and very arbitrary enforcement of the tax laws. Offshore, ah there was a great deal of competition to create new user-friendly legislation.
02:50.08
Joe Field
There were very strong laws on bank secrecy in most of the offshore jurisdictions, and there was very much of a hostile attitude towards foreign revenue officers trying to come in and in enforce their own laws by getting access
02:55.78
carolinesclub
you
03:07.67
Joe Field
to files of banks and this was something that was supported by criminal sanctions at the time in most of these jurisdictions and indeed there was enforcement on a fairly regular basis.
03:22.93
carolinesclub
Thank you. um Entrepreneurial and ambitious offshore islands were able to change their laws, which you've just alluded to, to accommodate this new demand for asset protection, including legislation on trusts, foundations, and wealth investment. In retrospect, as you've already said, this was the Wild West, but it was also the golden era of the private client offshore industry. Tell me a little bit about this bonanza time.
03:52.18
Joe Field
Well, I think one thing we need to keep in mind is that many of these jurisdictions had no natural resources. They had no agriculture, and this was a business they could get into which could help support very often extremely small economies, ah which had little in the way of capacity to support their populations. It was an active time but there was very fierce competition among the jurisdictions because there was a perception that there was only so much business out there and in order to send your wares to foreign clients you had to have something that was different and there was some differentiation and a lot of new laws.
04:41.83
Joe Field
Some jurisdictions such as Bermuda and the Channel Islands tried to qualify themselves as quality jurisdictionated ah jurisdictions in order to differentiate themselves from some of the other places in the Caribbean, which were really competing to stay alive. This was a cause for some very, very grave concern because one had to ask who could do the work. It varied a great deal from place to place. In the Cayman Islands, for example, they imported English lawyers and accountants by the droves. And in the Bahamas, they said, well, you have to be a native in order to be a partner at a law firm or
05:24.95
Joe Field
an accounting firm and in many of the smaller jurisdictions ah even if they wanted to attract business they just didn't have the wherewithal to do so. Almost anybody could be a professional trustee. And this was often the case and that led to a great deal of problems ah where people signed up for trusts that eventually exploded or the trustee would have gone with the money. So people who were unaware of some of the sophistication and some of the complexity of the problem got taken to the cleaners. And this was an unfortunate byproduct.
06:02.22
Joe Field
of this great competition for offshore business. It was interesting to note that many of the offshore jurisdictions put on elaborate shows abroad in order to promote themselves. And I can remember even when I was living in Hong Kong that a number of these jurisdictions, many of which could barely afford the airfares, would put on elaborate to spread displays and say, calm down, we are the greatest. I think it's interesting to note that while this has been curtailed, and I'm sure we're going to talk about this a little bit in a few minutes, but
06:36.75
Joe Field
While this has been largely curtailed in terms of trusts and offshore companies, we are now seeing sort of a repetition of what goes around, comes around in the area of buying passports. And there's now a number of jurisdictions in that field that are offering nationality to foreigners for a fee. So it's it's a world that has changed, but many of the same roots are still there.
07:08.33
carolinesclub
Thank you. The growth of these offshore financial centres and their innovation to create ever more complex structures to meet the demands of their international clients was of course a thorn in the side of worldwide tax authorities, greedy offspring, disgruntled former spouses and dissatisfied creditors. The problem was not that their claim would not succeed. It was a lack of reliable information to support it. Do you agree with this? And and maybe you can explain a little bit more about what you've experienced.
07:45.15
Joe Field
Well, as I see it, this got to be a real problem. But it was not the only problem there was. Lack of information was not the sole culprit. From my mind, ah at first, the structures were reasonable and the concepts made some sense. For example, eliminating the rule against perpetuities and some grants of additional powers to trustees and protectors was a sensible thing to do. But it quickly got excessive. And eventually, protectors became quasi-trustees, and settlers had enormous powers.
08:25.06
Joe Field
The jurisdictions often lacked the power to try complex cases, which is an area akin to what you were talking about. And this was particularly true in the areas of bankruptcy and divorce. The other thing that happened was that sometimes new laws were within a jurisdiction such as the Star Trust and the Cayman Islands meant that you could not export a trust. And that later became a problem. particularly when Panama went down and people became afraid that the jurisdiction really could have some problems. Also, onshore but jurisdictions began to emulate the US and created long-arm powers such as the UK in divorce cases where UK courts could come in and basically trash the decision of an offshore court. And this added to the problem of not being able to obtain information.
09:20.93
carolinesclub
Yeah, very interesting. Moving on, worldwide tax authorities were desperate for information on undeclared monies offshore.
09:24.45
Joe Field
We are not going to have to do this. We are going to have to do this.
09:30.89
carolinesclub
So they resorted to criminal means, buying information stolen by data hackers, first from Panama law firm Mossack from Hacker, and then from global law firm Applebee. Tell me your reaction to these extraordinary moves.
09:46.70
Joe Field
Well, I thought it was a very bad precedent now. I'll have some thoughts on that, but it was relatively small beer when compared to some of the current led EU legislation. Of greater concern to me in the examples was the ignorance of the league of investigative journalists and their propensity to improperly report on facts. Many innocent people were hurt and spent a lot of time and money clearing their names. And of course, there was no recourse to the journalists.
10:17.81
Joe Field
They did this totally without fear, because nobody was going to come after them. They even made a movie of the... monster the ah fund Most public sector firm and its activities in the Panama Papers.
10:27.27
carolinesclub
One sec, one sec.
10:32.55
Joe Field
And of course, there they were a little more careful because the movie producers were liable. And so I think this whole thing was just a scandal. And I think it created some other problems, which I suppose we'll go into in a minute or two.
10:49.70
carolinesclub
um Tell me a little bit from your understanding the difference between the case of Mossack Fonseca and Appleby.
10:51.61
Joe Field
yeah
10:57.15
carolinesclub
There was no one that was to account from Appleby.
10:57.98
Joe Field
i
11:00.81
Joe Field
Well, I think again, this goes back to the point I made about Bermuda being a very ah careful and conservative jurisdiction and Panama perhaps a little less so. And I think that was in part responsible. I do think that it was very funny when they were looking around for culprits in
11:23.15
Joe Field
Bermuda, they came up with the Prime Minister whose father had an account, I think, with Applebee's Trust Company, and the Queen. And they said she had an account in Bermuda.
11:31.06
carolinesclub
ah
11:33.65
Joe Field
I don't know what's wrong with having an ah account in Bermuda, but, you know, since she owned the place, I don't see anything wrong with that. But it is an interesting footnote that there were a number of cases with Fonsaka, and not so many with Applebee's. I do think that there were very few prosecutions which came as a result of the Panama Papers, which again goes to the rather ah hyperbolic claims made by the journalists, which in fact turned out to be difficult to prove.
12:08.37
carolinesclub
Before we get to the current situation, let's pause to look at look at you and your life.
12:09.67
Joe Field
and
12:14.56
carolinesclub
um You have worked extensively with wealthy families in Europe and Asia, where you've lived for long periods, as well as with families from the Middle East and Latin America. You've worked in New York, Washington, DC, Los Angeles, Brussels, Paris, Geneva, London and Hong Kong, and have countless qualifications.
12:33.77
Joe Field
oh
12:34.94
carolinesclub
However, despite living in airplanes and golf balls, home is with your wife in Florida and Rhode Island with your two sons and a stepdaughter.
12:39.34
Joe Field
please
12:44.69
carolinesclub
Tell me a little bit about your home life and your non-work interests.
12:49.22
Joe Field
We Well, I'm still out there, but I've given up the big big smoke on a full-time basis. I, like some other people I know, have sort of decided that living in a big city is not necessarily the right thing to do. In Rhode Island, I live inside of the Narragansett Bay, and in Florida, I'm in a tennis enclave very near the beach, and it's a pretty pleasant existence. My wife just retired and my sons each run small tech companies, my older one in San Francisco and my younger one in New York, while my daughter runs a very large portfolio for the Prudential Insurance Company and is very active in environmental causes. I now have crew two granddaughters, both of which
13:39.36
Joe Field
are in Oakland, California, and I love seeing them. And I still enjoy traveling and love to play tennis. I do a lot of reading and I do some writing as well. That's me.
13:52.01
carolinesclub
It sounds like an idyllic life and you well deserve it, Jo.
13:56.62
Joe Field
Well, I'm not complaining.
13:58.80
carolinesclub
yeah Let's get up to modern day time because I think we really need to to look at this quite closely. In recent years we've seen the bold move taken by the US government in passing the Foreign Account Tax Compliance Act, known as FATCA, which was followed by OECD countries with the Common Reporting Standard. This has been accompanied by a rise in aggressive legislation aimed at the private client industry to be whistleblowers for clients who may suspect of evading tax. You have said that if you were to be a sheriff, you would want impunity
14:36.43
carolinesclub
and a badge. Tell me about this and how you feel about it.
14:41.78
Joe Field
Well, not surprisingly, I feel pretty strongly about it. And your reference to governments paying for illicit information is just to me the point of the wedge. When Carl Levin, a Michigan senator, and Barack Obama, a former president, conceived of FATCA, It justified it by claiming that it would raise over $100 billion dollars in hidden tax revenue. Today, FATCA may have recovered nearly $10 billion. So the results have been very short of what they thought they were going to do. Yesterday, the IRS claimed that its new Hunting the Rich program has netted a billion dollars so far in new domestic revenue. Bravo.
15:38.97
Joe Field
This initiative cost $650 billion dollars to put into force. CRS, the Common Reporting Standard, was originally called ah Global FATCA, so there are a lot of connections. The major difference being that FATCA shit does not have international effects for non-US taxpayers, and CRS provides for the automatic exchange of information. It's a very major difference.
16:18.23
Joe Field
I am concerned generally that revenue authorities and governments also have trampled over what was once seen as rights and seem to have no problem with other laws either, such as the European Charter on Human Rights and computer protection legislation. And I think this is a very dangerous move in the wrong direction. From a selfish perspective, what is particularly galling to me is how many of these laws deputize advisors as agents of the state. This began in the UK with POCA and
16:56.69
Joe Field
legislation which requires the reporting of suspicious behavior and some of the laws such as the anti-russian seizure rules and some of the tax legislation require clients to turn away business or turn in their clients and if they fail to do so they face criminal sanctions. There is even per se legislation which if it isn't followed, advisors can end up being running afoul of of criminal laws. As I have said, had I known at the beginning of my career, I would have demanded a badge and a Glock if I were going to be an agent of the state. And I object very strongly to this.
17:43.44
carolinesclub
You mentioned um during during that but reply that it cost, it has cost $650 billion dollars to to raise the $10 billion dollars in extra taxes.
17:55.98
Joe Field
one One billion. One billion.
17:58.24
carolinesclub
at One billion, so sorry. um Tell me who's paid those that money?
18:03.49
Joe Field
The US taxpayer, it's part of, I'm being a little hyperbolic myself there. I shouldn't do that. But the 650 billion is what the revision of the IRS has cost. And that includes going after rich people. It includes hiring new agents. It includes getting new computers. It's a major revamp, which would have taken place anyway. But I think bragging about receiving a billion dollars in income after having spent $650 billion of taxpayer money may be perhaps a little exaggerated.
18:40.06
carolinesclub
But the cost has also been extreme on the institutions that have had to put in place new facilities in order to to comply with these rather vicious laws.
18:53.93
Joe Field
I fully agree and, you know, they're not advisors, but I have a theory that there is a family in Siberia called the Nies. And they are very prolific and produce lots of children and they go to work for international banks. And the only thing that the Nies know how to say is Niet. and In addition to creating enormous costs for the banks, the banks have become much more cautious.
19:24.99
Joe Field
and i think that it's
19:29.19
Joe Field
become a very serious problem to conduct a lot of business. And that's another byproduct of all of this curiosity on the part of governments.
19:34.50
carolinesclub
in.
19:39.82
Joe Field
And I just wonder, why do they need all this information? They have it, they have access to it. But what does it tell them? And I'm not sure it tells them very much. I think people are much more compliant than they used to be. The idea of tax evasion being a sport is certainly no longer the case. And in most sophisticated countries other than perhaps Russia and China, I think that ah the ability to evade taxes far lower than it was 10 or 20 years ago.
20:12.50
carolinesclub
I couldn't agree more. My last question is one about which I am particularly interested and I'd love to hear your views Jo.
20:20.40
Joe Field
Please.
20:21.14
carolinesclub
Offshore financial centres comply with FATCA and CRS because if they don't they will be blackballed. This has led to a fall in business in those jurisdictions. The money, however, I and i understand, and correct me if I'm wrong, has migrated to the US, to states such as Delaware, North Dakota, and Alaska, where the OECD rules of CRS do not apply. Tell me a little bit about this lacuna in the worldwide drive towards transparency.
20:54.78
Joe Field
Well, I'm on the other side of the pond, and I'm not sure that I view this as a lacuna. This is a policy of the United States, which has been extended greatly over many, many years, and the US is not a party to CRS. So there's a lot of talk that it will become one, and that may be the case. But so far, ah it has been resisted both in Congress and by various legal bodies. And I think if Mr. Trump is reelected, it's unlikely to change while he is president.
21:33.28
Joe Field
The United States has long defended its independence from foreign interference, both domestically and abroad. It started with the Monroe Doctrine in the early 19th century, ah which gave the US government sweeping military powers in the Western Hemisphere and continued judicially with the in the 20th century with the long-arm jurisdiction rules, which I mentioned before, which gave authority ah to US government powers to obtain information abroad, which was often contested before FACA and foreign jurisdictions.
22:08.53
Joe Field
And then we had the USA Patriot Act after the 9-11 events which gave broad and sweeping powers to the US government to obtain information both domestically and abroad. And then FATCA itself, which in theory gave reciprocal rights to some foreign states in the agreements, the bilateral agreements which were signed, um in terms of their being able to obtain and any information from the United States, but that was largely honored in the breach by the United States.
22:43.45
Joe Field
Many American states like the ones you cited are now competing for foreign business, I think ironically, in much the same way that the old offshore jurisdictions used to.
22:53.86
carolinesclub
Thank
22:53.98
Joe Field
ah We shall see where this goes, ah particularly if the US enacts FATCA because this would violate, I mean, CRS because this would violate CRS.
22:59.56
carolinesclub
you.
23:06.16
Joe Field
but I would know that the US federal government has just put into effect the corporate transparency act which will require the registration of beneficial owners of corporations and LLCs so little unclear what will happen with trust but once again we shall see where things go.
23:25.80
carolinesclub
Well, things are definitely moving, but have you seen a great influx of of business coming to these states in the US?
23:35.69
Joe Field
Well, I think that's ah that's a difficult thing to measure. I think there has been a great influx. And I think there are two things that I would use to qualify that. One is, what is great? I don't know what the percentage of people who could take advantage of this is compared to the number of people that have. And I think, secondly, there are some varying degrees of acceptance of this notion.
23:56.83
carolinesclub
Yeah.
24:04.17
Joe Field
A lot of people say, look, we are not part of CRS, but we should honor it where we are dealing with clients from countries that are CRS signatories. And there is the theory that if you go on a vacation to France or Italy, you might get arrested if you have encouraged locals who have violated the tax law ah to set up a Delaware trust. um The other part of this, which is is is of concern, is that for those who do support this, where do you draw the line? um I personally think that there are times when using a US trust makes sense, and there are two examples that come very much to mind. One is Saudi Arabia.
24:53.56
Joe Field
where I had the son of one of the guests at the Hyatt Regency, his father was there for two years, ah who wanted to set up a US trust and didn't want to go to a CRS jurisdiction.
25:01.15
carolinesclub
Thanks.
25:06.55
Joe Field
And I thought that was a valid concern since there's no income the income tax in Saudi Arabia, and CRS is a tax law, I didn't have any problem with that. And I think the other people are people who may come from countries where it is very dangerous for them to ah reveal anything about what they do outside of their home jurisdiction. There's still a large number of countries like this. And I think China is a very good example. And if they do have offshore assets, which in some cases they are permitted to do, they don't particularly want this to be reported back to the Chinese government on a regular basis because it can give leverage to the government to take sanctions against them. And I think the leading example of that was Mr. Ma.
26:00.96
Joe Field
so i i'm I'm a little bit perturbed by where you go with this.
26:07.35
carolinesclub
And just just just to end on this note, Jo, if you had a crystal ball, where do you think that the this industry will will head into over the next few years?
26:20.04
Joe Field
Well, if I had a crystal ball, I think it would probably explode, just like the political situation has everywhere in the world. and So much is dependent on what happens in France, in the UK and the US with new governments in the coming year. I think it's hard to say where we're going to be offshore. ah Obviously, the UK has a strong left leaning government. ah What they are going to pass in terms of legislation remains to be seen. If Mr. Trump becomes the next president, I don't think he's going to spend a lot of time ah with Sir Keith Starr. France may have a left government, but it doesn't look that way. It looks like it's going to be just pure chaos.
27:10.82
Joe Field
The US, Mr. Biden didn't do very well again last night. Ironically, the Republicans are keeping quiet. It's the Democrats that are creating trouble for him now. And having no candidate eight weeks before the election or 10 weeks before the election is something of a problem. So um I think that The US states that are active in this place will continue to make themselves heard. I don't see any immediate legislation in the US which will go against this. I think the UK will enact a whole lot of legislation because they have
27:51.42
Joe Field
Add a policy of soaking the rich and doing things like putting v eight on school fees i think it's counterproductive i think simply saying that we want everybody to go to a a state school. is a nice idea, but until the state schools are worthy of that, I think people who can afford it should have the alternative of using private schools. And I do think it's interesting that many of those schools are financially blind when it comes to admission, and they will admit students who do not meet the criteria to pay all the bills. so
28:31.80
Joe Field
um There's a great Chinese curse, which is may our children live in interesting times. And I think these are interesting times.
28:41.49
carolinesclub
yeah I'm not sure we want to continue me in interesting times. Jo, thank you so much for joining me on how to keep your money.
28:48.84
Joe Field
Great pleasure.
28:49.95
carolinesclub
The trends look ominous for the international private client industry and will likely intensify, especially if your crystal ball explodes. Currently the full force of the law is being held back by a lack of government resources but this is only temporary. It is not a good time to be an internationally wealthy family. If any of our listeners would like to know more about Caroline's Club where you can learn how to win business, make more money and create engaging marketing material with like-minded professionals, please visit our website or contact us by email or phone. If you have not already done so, sign up for our newsletter and register your interest in joining our club and being a part of the revolution. Joe, thank you so much for joining us.
29:37.31
Joe Field
A great pleasure and always a pleasure to see you and I think Caroline's Club is a very good idea.
29:45.81
carolinesclub
Thank you too.
