Cayman Data Protection Law
1 August 2019
This article features Rolf Caspers Head of Sanne Group (Luxembourg) S.A. and was published in the Professionals of the Financial Sector (PSF) in Luxembourg December issue. To read this article in PDF, click here, to view the full publication, click here.
We are seeing a very positive change driven by the growth of alternative products and securitisation, which, beyond regained investor interest, is primarily due to the combination of two factors: BEPS (Base Erosion and Profit Shifting) and Brexit. On the one hand, BEPS has generated an increase in demand for services from professionals in terms of substance and compliance, and Luxembourg is taking advantage of its sound, internationally-renowned expertise and this "flight-to-quality" phenomenon. On the other, the uncertainties surrounding Brexit have prompted many companies, particularly asset managers, to relocate to the continent to distribute their products in the European Union and follow investor demand for EU-based products. In this context, Luxembourg appears to be the preferred destination for the creation of more complex alternative funds.
Furthermore, with the AIFM Directive, we are witnessing a centralisation of products, and Luxembourg also offers optimum flexibility for structures (SIF, UCITS, RAIF, securitisation vehicles, etc.) and an ideal environment for the cross-border activities of asset management companies.
Major regulatory developments (AIFMD, GDPR, FATCA, AML, etc.) are clearly impacting trends. Client demands are more and more complex and the skills required have changed drastically. It is becoming increasingly difficult for small players to gain or even retain all the necessary skills. Due to this regulatory pressure and the need to attain a critical size, we should continue to see a concentration of players. I wouldn't be surprised to see a handful of large companies sharing the market in a few years' time.
Compliance with BEPS regulations has enhanced Luxembourg's image outside the country.
More importantly, Luxembourg is still facing problems attracting talent, such as accountants and computer specialists for example.
One answer could consist in using outsourcing solutions, but we must bear in mind that successful outsourcing demands ancient internal organisation. On a national level, outsourcing will also require different skills and qualifications. Quality of work will change; we should outsource the least value-added tasks, and adapt training systems accordingly. To grow, we must mature, but we have the capacity to do that.
Access to a corporate banking system, i.e. a system dedicated to our own and to our clients' business, is another challenge, although possibly less prominent. It is not always easy for management organisations to open an account in a Luxembourg bank and be able to make international transfers.
We are seeing the emergence of a new kind of activity with financial technologies, Blockchain technology, ICOs (Initial Coin Offering) and cryptocurrencies.
We are at the dawn of a real technology revolution and we mustn't miss it. Luxembourg is multi-disciplinary, but we must reach a consensus on the rules and operating methods. We must work together to develop solutions in FinTech services with, for example, fund robo-advisors, Blockchain bond issues and the use of cryptocurrency to invest in funds. A revolution is also occurring in terms of means. In the UK, for example, some sectors already o"er Sandbox Arrangements so that innovative products and services or new service models can be tested in a predefined environment without having to fulfill strict regulatory requirements.
There are numerous initiatives for progress on standardisation and automation, but also to o"er new services. Financial technology is a major opportunity, with the emergence of smart contracts and blockchain to keep contracts for example.
I'm sure that Luxembourg will have a role to play in this context.Alongside these technological innovations, Luxembourg is a confirmed financial centre, with key language skills, definite flexibility and an unrivaled product and service offering. Investors from outside the EU regard Luxembourg as a hub.
Luxembourg must shed its image as a tax haven among foreign companies, professionals and the "man in the street", once and for all. I believe we should pursue and step up our efforts to improve our "brand image".
I would also like to see some substantial investments in facilities, and reasonable prices in real estate, to support the country's growth and development. The Greater Region has limited capacities and we must improve our connections with other regions, beyond our borders.