The Cayman Islands are a group of three islands, Grand Cayman, Cayman Brac and Little Cayman, situated in the western Caribbean 475 miles south of Florida in the United States and 200 miles north west of Jamaica. The capital, George Town, is on Grand Cayman and is the government, business and financial centre. The resident population of the islands is approximately 33,000 with 32,000 residing on Grand Cayman. English is the official language.


The Cayman Islands are a British Crown Colony and, as such, are the responsibility of the British Government in London. However, for all practical purposes they are governed under a constitution which gives executive and legislative power to a Governor, an Executive Council and a Legislative Assembly. The islands, therefore, enjoy a large measure of self government.

The Governor is appointed by the British Government and has overall responsibility for the administration of the islands. Government policy is made by an Executive Council consisting of the Governor, three senior civil servants (the Chief Secretary, the Attorney General and the Financial Secretary) and five ministers, who are elected members of the Legislative Assembly appointed by their fellow members. There are ministerial portfolios and government departments which are staffed by civil servants. Members of the Executive Council each have particular areas of responsibility and the Executive Council takes the form of a cabinet.

The Cayman Islands are entirely responsible for passing their own laws and the British Government will only intervene in limited circumstances. Legislation is initiated by the Executive Council but must be passed by the Legislative Assembly, which consists of the Speaker as president, three senior civil servants and fifteen elected members. General elections take place every four years in November. The islands enjoy stable government and there is no desire for independence from the United Kingdom.

Legal System

The laws of the Cayman Islands are based on English common law with the addition of local statutes which have in many respects changed and modernised the common law. The islands have a good legal system which is constantly being upgraded to meet the demands of the financial industry.

The courts system in the Cayman Islands is a simple one and practice and procedures are based on English law. Minor criminal and civil cases are tried by a Magistrate sitting in the Summary Court. All serious crimes and most civil cases are tried by the Grand Court, which is presided over by the Chief Justice and Grand Court judges who permanently reside in the islands. Appeals lie from the Grand Court to the Cayman Islands Court of Appeal which sits in Grand Cayman and from there to the Judicial Committee of the Privy Council in England. Copies of laws and regulations are readily available from the Clerk of the Legislative Assembly, Legislative Assembly, George Town, Grand Cayman, Cayman Islands.


The Cayman Islands are politically and economically stable. The islands have a substantial invisible trade surplus with the outside world, largely as a result of tourism and the activities of the financial community. Unemployment is virtually non-existent and the standard of living is arguably the highest in the Caribbean. This favourable economic situation is reflected in the political stability that the islands enjoy.


The Cayman Islands have excellent direct dial telephone, telecopier, cable and telex links, and a new fiber optic cable system is presently under construction. The postal service is adequate, supplemented by excellent air courier services to virtually all parts of the world. Satellite television services are widely used and there are two local television and radio stations. Internet access is readily available.

American Airlines; American Trans Air; Air Jamaica; British Airways; Cayman Airways; Northwest Airlines and US Air provide regular scheduled flights from Miami, Tampa and Orlando, Florida; Houston, Texas; Atlanta, Georgia; Charlotte, North Carolina; Baltimore, Maryland; Seattle, Washington; London, England and Kingston, Jamaica. There are daily flights from Miami, Baltimore and Charlotte and several flights each week from Atlanta; Houston; Orlando; Tampa; Seattle and Kingston. There are two flights per week from London.


There are no taxes on companies or individuals and no inheritance taxes or estate duties. Government revenues are principally derived from import duties on virtually all imported goods, stamp duties, registration and license fees.

The absence of all forms of direct taxation also means that there are no double taxation treaties and hence no disclosure of information clauses on taxation matters with other territories.


The currency of the Cayman Islands is the Cayman Islands dollar which is tied to the United States dollar at the rate of US$1.20 = CI$1.00. There are no restrictions on the use of United States currency within the Cayman Islands.


There are no foreign exchange control requirements and there are no reporting requirements or restrictions on the import or export of foreign currencies to or from the Cayman Islands.


The professional services infrastructure is well developed with excellent banking, trust company, legal, accounting, auditing, United States taxation, insurance management, mutual fund administration and professional services readily available.


Confidentiality is protected in the Cayman Islands. The Banks and Trust Companies Law and the Confidential Relationships (Preservation) Law impose criminal penalties on Government officials and professional persons who make unauthorised disclosure of information obtained in the course of their duties or professional conduct. The common law rule of confidentiality in a bank's relationship with its clients also applies. However, the Confidential Relationships Preservation Law contains detailed provisions for disclosure of confidential relationships in appropriate circumstances. For example, prima facie evidence of criminal activity.

In 1984 the United Kingdom government, on behalf of the Cayman Islands, and the United States Government concluded discussions aimed at preventing narcotics traffickers from abusing the benefits of the Cayman Islands laws protecting confidential relationships. The result was an exchange of letters between the two governments which are known as the Narcotics Agreement. Cayman Islands Legislation, the Narcotic Drugs (Evidence) (United States of America) Law 1984 followed to implement the Narcotics Agreement. The law provides a mechanism for obtaining, through the Attorney's General of the United States and the Cayman Islands, evidence required in United States Federal and Grand Jury Investigations and Federal Court proceedings relating to activities falling under the Single Convention on Narcotic Drugs, 1961. The procedure must be strictly complied with. It can only apply where narcotics or narcotics related activity, as referred to in the convention are involved, and any information obtained may not be used in any other case or for any other purpose.

In 1986 the governments of the United Kingdom, including the Cayman Islands, and the United States signed a treaty for improving the effectiveness of law enforcement authorities of the United States and the Cayman Islands in the prosecution and suppression of crime by mutual legal assistance and cooperation in criminal matters. The terms of the treaty are set out in the Mutual Legal Assistance (United States of America) Law. The Treaty specifies certain limitations on mutual assistance. For example, the assistance afforded by the Treaty specifically does not extend to any matter which relates directly or indirectly to matters of taxation unless related to the unlawful proceeds of criminal activity covered by the Treaty or to the dishonest proceeds of promoting fraudulent tax shelters.

The Law provides for a Central Authority in each jurisdiction to be the recipient of the request for assistance. In the United States that is the Attorney General or his nominee and in the Cayman Islands, it is the Cayman Mutual Legal Assistance Authority. This authority consists of the Chief Justice or other single judge of the Cayman Islands Grand Court designated by him.

Under the Misuse of Drugs Law, which imposes criminal penalties for money laundering activities related to drug trafficking, disclosure of confidential information may be made to the Cayman Islands police where the person making the disclosure believes that any funds or investments are derived from or used in connection with drug trafficking.

The Proceeds of Criminal Conduct Law, enacted by the Legislature in September 1996, is designed to facilitate the detection of money laundering and other criminal offences. It extends the principles of the Misuse of Drugs Law to all serious crimes and creates four new offences - money laundering, assisting in Money Laundering, receiving the proceeds of another's criminal conduct and tipping off. It provides for the freezing and forfeiture of the assets of those who have been engaged in criminal conduct and their donees.

The Law establishes an Authority, currently comprised of three senior police officers, to whom suspicious transactions may be reported. Such reporting is voluntary not compulsory but is necessary if the statutory protection from prosecution for assisting in money laundering or receiving the proceeds of criminal conduct is to be available.

There is provision for a Code of Practice, currently being drafted, which will set forth the practical aspects of due diligence procedures and record keeping.

In order to enforce a foreign freezing or forfeiture order of an overseas court, the offence giving rise to the order must also constitute an offence under Cayman Islands Law. The enforcement of foreign orders relating to tax matters is, except in very limited circumstances, expressly excluded.

The above are seen to be positive measures by Government to demonstrate its opposition to drug related and money laundering activities. The Cayman Islands regulatory regime received a clean bill of health from the Caribbean Financial Action Task Force (CFATF) at its March 1996 meeting. The CFATF report concluded that the financial industry in the Cayman Islands is "well regulated and supervised to a high standard".


The complete absence of taxes, coupled with economical and political stability, good communications, international, professional and banking facilities and modern legislation, has attracted the attention of those seeking a flexible and sophisticated jurisdiction for international transactions.

Modern company, trust, banking, insurance, partnership, mutual fund and related legislation have made the Cayman Islands one of the world's leading offshore centres. Companies and trusts can be set up very quickly. They can also be wound up reasonably quickly and there is provision for dissolving an inactive company immediately without it being wound up.

The Government actively encourages offshore activities and is making a deliberate effort to maintain and increase the islands' attractiveness. New ideas are constantly being considered and local laws and regulations continue to be amended and modernised to meet demand.

Banking and professional support services are competent to handle very substantial financial and related transactions.

Effective January 1997, the Cayman Islands Government formed the Cayman Islands Monetary Authority and charged it with, inter alia, the issue and redemption of the currency, to maintain monetary stability and a sound financial system and to regulate banks, trust companies, insurance companies and managers and mutual funds.

The Authority has the power to disclose to foreign regulators information necessary to enable that regulator to exercise similar functions to those exercised by the Authority.

The Cayman Islands Stock Exchange was established in 1996. A Stock Exchange Authority comprised of the Financial Secretary, the Attorney General and others appointed by the Government has overall responsibility for the policy, regulation and supervision of the Exchange.

This information provides an introduction to aspects of establishing business in the Cayman Islands for the benefit of clients who may be considering using the Islands as an offshore domicile. It is not exhaustive and is merely intended to give a broad indication of possible courses of action.

Before taking action on any business or other decisions related to the Cayman Islands, specific and particular advice should be sought from domestic taxation, legal, accountancy and other relevant professional advisers.

The information provided reflects the laws and regulations existing at December 31, 1996, but later developments have been noted where possible.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.