News

     

Lucy Keane examines Gibraltar’s recent removal from the FTAF’s “Grey” List and what this means for the Territory’s future in Litigation Finance Insider

By Lucy Keane
Back to News

Author:

Lucy Keane
Lucy Keane

Counsel Lucy Keane discusses Gibraltar’s vibrant and competitive future in the financial services sector, following the Territory’s recent removal from the FATF’s “Grey” List, as well as from the UK and European Commission’s lists of high-risk countries.

Lucy’s article was published in Litigation Finance Insider, 15 April 2024, and can be found here

There was much rejoicing recently on the Rock as Gibraltar became whitelisted after some years on the financial sidelines. The British Overseas Territory’s recent removal from the FATF (“Financial Action Task Force”) “Grey” List as well as from the UK and European Commission’s lists of high-risk countries, is surely the reason for many a sunny disposition on the Rock.

The last few years have been worrying for Gibraltar. In 2017, the FATF, the organisation that leads global action to tackle money laundering and terrorist financing, placed Gibraltar on its Grey List, signifying that it had concerns over the Rock’s implementation of effective anti-money laundering and counter-terrorist financing (AML/CFT) measures. The FATF expects countries to have effective frameworks in place to combat these threats to financial systems and the broader economy. Not only must a country have compliant laws and regulations, but they must also be enforced.

The FATF Grey listing was a matter of grave concern in Gibraltar, not just to HM Government of Gibraltar, but also to the vibrant, competitive, and expanding financial services sector in the Territory. It raised questions about financial transparency and compliance, with potential for serious harm being caused to the reputation of Gibraltar as a financial services centre and consequent loss of investment.

HM Government of Gibraltar set about working tirelessly to improve the jurisdiction’s financial controls and to ensure that all agencies of government, from the prosecution service to the regulatory authorities were assessed and measures put in place to meet the areas of improvement designated by FATF.

Of further significant concern to those on the Rock was the European Commission’s listing of Gibraltar as a high-risk country pursuant to the Fourth Anti-Money Laundering Directive (“4 MLD”). The 4 MLD establishes a legal framework for the prevention of AML/CFT and introduces measures to combat these threats. Despite the protests of HM Government of Gibraltar, who insisted that they had already gone a long way to meet the FATF’s requirements, the EU demanded that Gibraltar put in place measures designed to improve risk assessment, due diligence and information sharing between cross-border law enforcement agencies.

Since then, government agencies and the private sector in Gibraltar have worked hand-in-glove to strive to meet the requirements not just of the EU, but also the FATF and the UK. To their credit, they have succeeded.

The EU’s decision in March 2024, which had immediate and binding effect on all EU member states, to remove Gibraltar from its list of high-risk countries was therefore greeted with much rejoicing on the Rock. It followed hard on the heels of the FATF’s decision in February 2024 to remove Gibraltar from its Grey List and the UK’s decision to similarly whitelist the Territory. As the Chief Minister of Gibraltar, Fabian Picardo KC MP noted, “Gibraltar’s FATF white-listing not only enhances our reputation but also strengthens our position as a trusted and compliant international financial centre”.

There is no doubt that Gibraltar’s hard work in implementing effective strategies to combat the criminal use and movement of funds has paid off. It is now back on centre stage in the international financial world and is globally recognised as a responsible and transparent financial centre.

This is good news for the jurisdiction’s thriving financial services sector. Already having an advantage over other offshore centres, with passporting rights into the UK financial markets, Gibraltar’s providers of insurance, fintech, crypto, gambling, funds, wealth management and trust services stand to gain from the EU/UK/FATF whitelisting. Not only do they have the benefit of UK passporting rights, but they also have a strategically useful location on continental Europe, a low tax regime, a common law legal system and, last but not least, that summer sunshine.

For litigation funders, the question must be: are there opportunities in Gibraltar and what does the litigation landscape look like?

From a legal perspective, Gibraltar is a jurisdiction that is open to and comfortable with the concept of litigation funding. Its law and legal system mirror the UK in many ways. It is a common law, English-speaking jurisdiction, strategically placed on continental Europe. Its laws are based on English law; indeed, Gibraltar often adopts English law, including its Civil Procedure Rules, and judicial decisions as its own. The Supreme Court of Gibraltar, with its modern courtrooms and British coat of arms, would not be out of place in London – apart from the lush tropical gardens in which the colonial-style building sits.

Unlike another non-English but English-speaking common law jurisdiction in Europe – the Republic of Ireland – Gibraltar has been comfortable with the concept of litigation funding for some time. While Ireland still wrestles with the thorny question of whether or not to permit litigation funding (it is allowed in international commercial arbitration, but only recently) due to the torts and offences of maintenance and champerty, Gibraltar has adopted a different and more commercial approach. The Rock recognises litigation funding’s advantages of access to justice, equality of arms and attraction for business.

This openness to litigation funding in Gibraltar presents some attractive possibilities for funders. With much attention focused on the FTX collapse, Gibraltar’s exciting and growing crypto/fintech sector could be one such possibility. The renewal of confidence following the Territory’s whitelisting is likely to lead to a growth in business in all sectors and there is a sense that there may well be potentially lucrative returns for funders.

The hard work of many on the Rock in restoring Gibraltar to its rightful status therefore seems to be paying off and HM Government of Gibraltar’s commitment to maintaining the territory’s status is commendable.

There is no doubt that, for such a small jurisdiction, Gibraltar punches well above its weight. The type and value of claims is remarkable, often on a par with London and other major centres. For funders, the Rock is certainly worth a look and it may well be that returns can be had that are as solid as the Rock itself.

Latest news

All news