With the growing recognition by various non-G7 governments that there are significant economic benefits to be gained by implementing effective governmental governance procedures and a system that is recognised by the international community as adhering to the law, cross-continental capital flows for investment and the creation of private wealth have increased significantly.
The refocusing of large portions of investment capital to the emerging markets of Asia and Africa have presented challenges to financial institutions, banks, non-financial business and regulators as to how best to implement balanced regulatory mechanisms across continental borders. The recognition of a universal regulatory system is gaining worldwide acceptance.
Precedents of how best to achieve this difficult task can be found by an examination of international banking regulations (Basel 1 and Basel 2), various pieces of legislation such as the Sarbanes Oxley Act, the US Patriot Act, the Foreign Corrupt Practices Act of the US and the Application of the US Office of Foreign Asset Control, and other pieces of legislation implemented by various G7 governments. Not all have been successful.
The Sarbanes Oxley Act has adversely affected the US, shifting large parts of its worldwide capital markets function from New York to London and causing the loss of the international prestige that New York enjoyed as a premier jurisdiction for public issues. Other efforts, such as the OECD attempt to implement worldwide excessive taxation systems, have been met with scepticism and failure.
One of the most successful internationally accepted regulatory regimes has been the implementation of "Know Your Customer Rules", anti-money laundering and anti-terrorism legislation. The Cayman Islands, as one of the worlds leading financial centres, has been a leader in the implementation of this type of legislation. This has helped identify undesirable use of its financial systems. Sadly, the leading role of the Cayman Islands has been given little international recognition and few G7 countries (if any) have followed its lead.
"The Cayman Islands, as one of the worlds leading financial centres, has been a leader in the implementation of this type of legislation"
One of the difficulties experienced in the implementation of a globalised regulatory system has been the continuing efforts by many high-tax developed countries and international NGO's controlled by them to force emerging market economies to collect tax and/or report tax information back to them. This has been a serious stumbling block to the implementation of a globalised regulatory system.
Perhaps this will change in the future as international financial institutions and global manufacturing entities move into the emerging markets and their dependency on earnings from these areas increase. The stark reality of the global shift of the world's economic engines may dawn upon some of G7 politicians prior to redomiciliation out of their jurisdictions, permitting debate and eventual resolution of this issue.
While governments stall, global leaders in private industry have implemented policies across borders and these are having a profound effect on the implementation of worldwide standards in the regulation and operation of various market functions. These policies appear to have gained wide acceptance despite cultural differences. This may provide the starting point for a globally acceptable system capable of providing market regulation without sovereignty issues
Cayman Leads The Way
Cayman continues to lead in this field and regularly reviews and adjusts its laws, policies and procedures to meet new international challenges. This sensible balance has continued to attract a multitude of international business institutions.
Regulation for the sake of regulation imposes unnecessary costs and bureaucratic procedures, and impedes markets – usually forcing them to move to friendlier homes.
Failure by leading western democracies to sensibly engage on these issues may result in the process proceeding without them taking the leading role. Not exactly what they envisage at the present time.
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