Cayman as a jurisdiction has consistently 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 then Cayman has remained proactive, signing tax- information agreements and passing laws and regulations that ensure the jurisdiction remains compliant and at the forefront of international standards.
The OECD's country ratings, based on compliance with FATF recommendations in 2013, provide a good example of the proactive approach taken by the Cayman Islands. In the OECD report, jurisdictions ratings are based on whether they have been subject to Phase 2 reviews or a more rigorous peer inspection on their effective compliance with the recommendations. For a country to be subject to Phase 2 review, it first has to achieve a certain level of compliance with Phase 1 review, which is focused on the laws and regulations and their alignment with the recommendations.
At the time of the OECD report, only 50 jurisdictions have undergone the more rigorous Phase 2 reviews, Cayman being one of them. Four of these 50 jurisdictions were rated non- compliant, two partially compliant, 26 largely compliant and 18 compliant. Cayman received a largely compliant rating and is therefore one level below the maximum rating, along with countries such as the UK, US, Germany and the Netherlands.
Further evidence of the Cayman Islands' compliance with global standards is also contained in the most recent IMF/FATF report in regards to AML and CFT in the Cayman Islands, excerpts of which follow:
The main regulatory body responsible for oversight of all financial business, the Cayman Islands Monetary Authority, is widely known to be cooperative with its cross-border counterparts and is a full member of the International Organization of Securities Commissions.
The Secrecy Myth
One of the misperceptions regarding transparency in the Cayman Islands is the myth that the jurisdiction is a so-called 'secrecy' jurisdiction. In fact, the Cayman Islands does not provide secrecy of any kind. Similar to any developed country where there is a basic right to privacy, there are no secrecy laws. The beneficial owners of companies are properly identified for all bank accounts. In addition, the courts or the regulators may access this information through an expedited and proven process. Finally it should be noted that corporate service providers are required to maintain records of the owners of every corporation, a regulation that has been in place in the Cayman Islands for many years and has been effected retroactively, ensuring there are no legacy issues where the beneficial owners cannot be identified. Both the regulation of corporate service providers and the retroactive due-diligence exercise are examples of how the Cayman Islands is significantly ahead of major jurisdictions like the US and the UK.
Proactive Tax Reporting
Cayman demonstrated its desire to proactively report tax information several years ago when it fully signed up to the European Union Savings Directive despite not being a European state, therefore proactively reporting all EU residents' accounts. The US and many European countries refused to participate.
More recently, Cayman was one of the first countries to commit and sign a Model 1 intergovernmental agreement in regards to FATCA, which ensures that no financial institution in Cayman can opt out of signing and therefore all US customers will be properly reported when FATCA is implemented.
Cayman also signed UK FATCA, as all overseas territories and crown dependencies of the UK have done but, more notably, was the first country outside Europe to commit to the European pilot on automatic exchange of information (effectively the global version of FATCA), led by the G8 and the OECD. This pro-activeness has granted Cayman a seat at several of the groups and committees involved in the implementation of these initiatives. It also ensures Cayman remains at the forefront of international standards and is slowly gaining its much-earned status as a transparent jurisdiction.
Cayman's financial industry will remain committed to playing a key role in the global financial industry and adhering to globally implemented standards.
We will continue to support our Government in ensuring we promote a level playing field and do not fall short of globally accepted standards.
We believe in sharing information with the appropriate authorities and through the appropriate channels in a way that respects the right of confidentiality without facilitating tax evasion or any other wrongdoing by our customers.
We believe in facilitating the enforcement of laws by other countries and preventing abuse through a simplification of those rules as opposed to policing global laws or relying on a moral duty to determine the appropriate level of tax to be paid.
We respect the right of other countries to determine and enforce their tax systems as we expect other jurisdictions and multilateral bodies to respect our choice.
About The Author
Ian Wight served as Managing Partner of Deloitte in the Cayman Islands for over 20 years with overall responsibility for the operations of the firm. He has extensive experience in insolvency matters and a special expertise in the windup of financial institutions, investment-fund companies and SPV companies. He has been an associate member of the Institute of Chartered Accountants in England and Wales since 1974 and a Fellow since 1981. He has been a member of the Cayman islands Society of Professional Accountants since 1979. Mr. Wight retired from Deloitte in 2012 and now works as a consultant, and has a consultancy arrangement with Deloitte. most recently, he was appointed by the governor as a member of the Commission for Standards in Public Life.
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