Finance sector must anticipate ‘blind spots’ and ‘dangerous assumptions’ - Feetham 

Gibraltar must “identify blind spots” and not fall for “dangerous assumptions” that the finance sector will remain successful forever, the Minister for Justice, Trade and Industry Nigel Feetham said at the biennial Gibraltar Association of Compliance Officers (GACO) conference this week. 

Mr Feetham was speaking to a packed conference at the Sunborn where he underscored the fast-paced nature of financial services, global geopolitical tensions, and tax changes. 

He told the room of compliance officers and executives that the Government needs to “think outside the box and intelligently” when it comes to adapting to changes across the financial sector and tax. 

The conference, called Risk on the Rock, had a central theme this year, Beyond the Obvious, by which Mr Feetham meant questioning assumptions. 

“Assumptions are often where blind spots begin,” he said. 

“Are we assuming that a successful and established Gibraltar finance sector will remain so forever? Are we assuming that tax collections will remain the same indefinitely? Are we assuming that areas of public expenditure will not increase and that revenues will keep up with ever increasing demands?” 

“Are we assuming that a regulatory framework designed years ago is appropriate for today’s technology? Are we assuming that a risk can be ignored because it has not materialised yet?” 

“Those are dangerous assumptions.” 

He said the biggest risks to the sector often began with new technology, a new disrupter, competitor jurisdictions, new forms of fraud, or a new geopolitical situation.  

Mr Feetham told the conference that Gibraltar must “always remain vigilant” to these issues, highlighting what happens when there is a failure to detect risks and that “uncertainty is not a reason for inaction”. 

His message to compliance professionals, directors, senior executives and regulated businesses in the room was that they should not assume that the absence of a problem meant the absence of risk.  

“Sometimes it simply means the risk has not materialised yet,” he said. 

“For Gibraltar, that mindset has become increasingly important. We have had to manage the consequences of Brexit. We have had to reform taxation. We have had to strengthen our response to financial crime.” 

“We have had to modernise gaming regulation. We are having to protect and diversify our economy. And we are now looking at new technologies and new international opportunities.” 

“None of that means, of course, we have all the answers. But it doesn’t mean that we can stand still either. We cannot. And perhaps that is the real meaning of Beyond the Obvious.”  

“It is not about predicting the future. It is about refusing to be surprised by it. And it is about what happens if our assumptions are wrong.” 

“It is about identifying the blind spots. It is about a vision for the future and not just thinking about today.” 

Mr Feetham also pointed to Gibraltar’s removal from the FATF grey list, highlighting strengthened legislation, increased resources, and unexplained wealth order legislation. 

The removal of Gibraltar from the FATF grey list, he said, was not the end of the journey but instead the beginning of the next phase. 

He stressed the need for collaboration between the Government, regulators, law enforcement and industry against sophisticated financial crime. 

Under his responsibility for taxation, Mr Feetham questioned whether Gibraltar’s tax system provided a sufficiently accurate picture of the economic value being generated by the businesses operating in Gibraltar. 

“The answer required us to look beneath the obvious,” he said. 

“It is about looking at the underlying data and it required a deep dive of the sort that I had been used to seeing when analysing market segments in my professional career.” 

“We found accumulated tax losses in the financial sectors in excess of £2.1 billion and increasing.” 

“We found large businesses reporting relatively small profits locally when profitability at group level could be considerably higher. We found filing compliance issues. And, importantly, we found that a significant proportion of corporate tax receipts was being generated by a very small number of regulated firms.” 

Mr Feetham said the Government’s tax strategy had led to a significant increase in corporate tax receipts, which had reached record levels. 

When it came to UK gambling taxation which will impact Gibraltar’s corporate tax revenues by around £40m, he said Gibraltar “cannot afford to stand still”. 

“We are modernising regulation while preserving the principles that made Gibraltar successful in the first place, [namely] integrity, consumer protection, responsible business and strong supervision,” he said. 

“And at the same time, we are looking beyond our traditional sources of growth and beyond our traditional markets.” 

Looking to the future, Gibraltar is scoping areas such as tokenisation and digital finance. 

Mr Feetham said Gibraltar should not wait until a technology becomes mainstream and then ask whether its legal and regulatory framework can accommodate it. 

“We should be asking the question now. What will financial services look like in three years? What will payments look like? What will ownership look like? What will a financial asset look like? And what risks will arise from those changes?”