• International recognition
  • Unique benefits
  • Conclusion

The Cayman Islands has demonstrated a commitment to transparency and embraced international initiatives like no other international financial centre.

One of the key first steps in this ongoing process takes us back to 1986, when Cayman signed the Mutual Legal Assistance Treaty with the US. Since that time, Cayman has remained proactive – signing Tax Information Exchange Agreements and passing laws and regulations that ensure it remains compliant and at the forefront of international standards.

International recognition

2013 was an important and very active year during which Cayman not only continued to engage in and, in many cases lead, the implementation of global initiatives, but also a year in which its efforts were acknowledged. Late in 2013, the OECD released the latest ratings against compliance with the Financial Action Task Force Recom-mendations and recognised Cayman's compliance with the standards.

The Cayman Islands was one of only 50 jurisdictions that were considered advanced enough by the Global Forum on Transparency and Exchange of Information for Tax Purposes to have undergone a Phase 2 peer review of the practical implem-entation of its legal and regulatory framework. Of those 50, four were rated "non-compliant", two "partially compliant", 26 "largely compliant" and 18 "compliant".

Cayman is therefore just one level below the maximum rating, along with the majority of countries including the UK, the US, Germany, and the Nether-lands. This backs up the latest Inter-national Monetary Fund Country Report (December 2009) on the FATF Recommendations for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CTF), which stated in regard to Cayman that:

  • "The legal framework for combating money laundering and terrorism financing is comprehensive."
  • "...the Financial Reporting Authority (FRA), is effective and is a focal point of the AML/CTF regime."
  • "There is a strong compliance culture in the Cayman Islands".

The main regulatory body in the Cayman Islands responsible for oversight of all financial business – The Cayman Islands Monetary Authority (CIMA) – was made a full member of the International Organisation of Securities Commissions (IOSCO) in 2011.

The early adoption and commitment to international initiatives like the G5 multilateral pilot –Cayman was not only the first UK Overseas Territory to commit but the first country outside Europe – has granted us a unique position through our key participation in the steering and peer review groups actively involved in the development of specific policies regarding the implementation of these initiatives.

Finally, and also during 2013, Cayman was one of the first countries to sign a Model 1 Intergovernmental Agreement (IGA) with the US for implementation of the US Foreign Account Tax Compliance Act (FATCA), as well as a similar IGA with the UK. This decision was not arrived at lightly or without deep analysis of the implications in broad consultation with industry. Both public and private sectors agreed it was the most effective way for Cayman to implement this standard. The speed and level of involvement in arriving at and implementing this decision is a key example of how the Cayman Islands continues to position itself ahead of many other jurisdictions.

Unique benefits

While the number of financial services centres (FSCs) has grown over the last two decades, Cayman has preserved its competitive position across a number of sectors and products. There are a number of drivers that have helped Cayman to maintain this edge.

  • Legal and judicial Framework – a critical characteristic. The use of English common law and statute and English-style courts is the preferred standard in the vast majority of international transactions. Many successful FSCs are current or former territories of the UK.
  • Political stability – changes in the political landscape can affect the viability of an FSC at a higher speed than any other factor. Whether its an extreme event like a coup or a property confiscation, or just a change to rules that affect some of the key factors needed by the financial industry.
  • Access to human capital – the access to foreign labour by local financial services providers is one of the ways in which local firms can access the required human capital with the necessary skills. It is also critical to the sustainability of these FSCs that the local population is given a "fair" opportunity to train and access the industry. Cayman has historically maintained a more flexible immigration policy than its peers, probably because population growth is less problematic for Cayman than for many other jurisdictions.
  • Availability of land – without land the social cost of growth is high, and without growth the countries find themselves faced with typical fiscal and economic problems. Cayman is uniquely positioned in this regard against other territories in the region.
  • Critical mass – the international standards of regulation have seen unprecedented growth over the last 20 years and there is nothing to indicate that this trend is likely to reverse any time soon. This acts as a barrier to entry for new jurisdictions. Without the critical mass to support the regulatory framework needed for compliance, FSCs will find themselves unable to offer services or will have to impose taxes, fees and duties that effectively price them out of market.
  • Credit quality – while FSCs usually act as a conduit of funds between the investors and the destination of the investments, the credit rating of the FSC itself can add a layer of risk, and as such, its fiscal status is critical. Cayman has maintained its credit rating at the same level as before the 2008 crisis – that's something very few countries can claim.
  • Government revenue collection – in order to operate as a facilitator of international capital flows, FSCs need a government revenue collection system that facilitates those flows without taxing them on a variable basis.
  • Accessibility – financial service centres, just like any business, need to be accessible to their customers. Location is the first obvious measure of accessibility, particularly in terms of time zone, which can easily explain the correlation between FSCs in the Caribbean and "Americas" business. However, accessibility should also include language, the ability to communicate effectively with the end users, and culture. Successful FSCs must have diverse yet cohesive societies, an essential part of attracting international businesses.
  • Focus – all successful FSCs have a high dependency on the financial services industry; they also have limited natural resources, and this lack of alternatives has created a focus on developing this industry. This lack of alternatives is not an ingredient in itself, but the focus it promotes is. Financial services are a highly competitive sector, and FSCs need to remain agile and responsive to customer needs in terms of products, legislation and regulation. Financial services contribute over half of Cayman's GDP and government revenue, ensuring it receives the attention needed for its continued success.
  • Appropriate regulation – regulators needs to perform a constant balancing act. It is critical for FSCs to remain compliant but they need to avoid getting too focused on duplicating the regulatory initiatives of other regulators without understanding the effect these proposed changes might have on their own customer base – the local financial industry. CIMA has successfully navigated the changing landscape while maintaining this equilibrium.


The Cayman Islands has continued to demonstrate its commitment and ability not only to comply with global standards, but to participate actively in their definition. This leadership, together with these ten unique benefits it has as a financial services centre, promises to maintain and enhance Cayman's leadership position. .


Gonzalo Jalles is CEO of Cayman Finance. Gonzalo headed HSBC Cayman for six years before founding the Javelin Group financial services consultancy in 2012. Previously he worked in HSBC's London, Bermuda and Argentina offices as Director of International Development, MD/CEO and Chief Investment Officer respectively. He served as President of the Cayman Islands Bankers' Association from 2009 to 2012. Gonzalo has a BA in Economics, a Masters in Finance and holds a Chartered Financial Analyst designation

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