Cayman Islands: The Cayman Model

Last Updated: 13 June 2018
Article by Jude Scott

Most Read Contributor in Cayman Islands, July 2018

The last year has seen a significant increase in attention to the role international financial centres play in driving global economic investment and growth as well as deterring, identifying, and combatting economic crimes like tax evasion, money-laundering, and corruption. While every IFC brings unique attributes to those efforts, certain characteristics stand out for their impact on the global marketplace. Taken as a whole, those characteristics could be considered as The Cayman Model.

The Cayman Model demonstrates how an international financial centre (IFC) can make the greatest contribution to the global economy by supporting efficient free trade, capital, investing, financing and services while also helping to fight global financial crime. Over the last 50 years, The Cayman Model has developed to not only define the jurisdiction as a responsible financial centre, but also to provide a roadmap other financial centres can follow.

Every jurisdiction, regardless of size, can contribute to the fight against global financial crime, but the greater the role a jurisdiction plays in the global economy, the more significant its contribution to the fight can be. That is why Cayman's role as a premier global financial hub, efficiently connecting law abiding users and providers of investment capital and financing around the world, is such an important component of the Cayman Model.

Approximately two-thirds of the world's hedge funds are domiciled in Cayman. Recent reporting has estimated the assets under management in these structures alone to be US$2.3tn. Cayman is also home to a growing private equity sector as well, with more than 20,000 vehicles in our jurisdiction.

An even broader look at Cayman's role as a premier global financial hub was included in a report issued late in 2017 by the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes. Their report estimated that in 2014, Cayman attracted at least US$4.1tn in banking assets, direct investment and portfolio investment.

These substantial figures represent Cayman's ability to enable parties from around the world who are domiciled in countries with differing laws, regulations, tax rules and customs to do business together in our neutral jurisdiction. Global investment capital is pooled in Cayman and then is invested into opportunities around the world, putting Cayman at the centre of the global financial system. Because Cayman serves as a premier global financial hub, its adherence to the highest global financial standards has established the jurisdiction as a strong partner in combatting international financial crime. Cayman and its financial services industry have been recognised for decades as a strong international partner in combatting corruption, money-laundering, terrorism financing and tax evasion.

Cayman has adopted more of the nearly twenty global financial standards than any other jurisdiction, including the European Union Savings Directive, US FATCA and the OECD Common Reporting Standard. Cayman also has signed onto the country-by-country reporting principles under BEPS. Adopting and implementing these standards is a key part of how Cayman contributes to global efforts to combat financial crimes while providing economic value to other jurisdictions worldwide.

As Cayman meets or exceeds the full range of globally-accepted standards for transparency and cross-border cooperation with law enforcement and tax authorities, as noted above, it is a transparent jurisdiction. Cayman does not meet any widely accepted definition of a tax haven. In fact, Cayman was rated by the OECD's Global Forum as "largely compliant" with the international standard for transparency and exchange of information, the same rating the OCED gave to other G20 Plus countries like Germany, Canada and Australia.

A foundational element of Cayman's commitment to transparency is our verified beneficial ownership regime. The Cayman Islands is a leader in beneficial ownership standards, having had a world class verified beneficial ownership regime in place for more than 15 years.

What distinguishes the Cayman Islands regime apart from most others around the world is that the information in our system is collected and verified by licensed Cayman Islands corporate service providers under existing anti-money laundering and know-your-customer regulations.

Many beneficial ownership registries – including central public registers – rely on self-reported information, which can be less complete and accurate. The information Cayman requires to be collected is available to the authorities making proper requests through existing information sharing channels between the Cayman Islands Government and other countries. Cayman has adopted automatic exchange of tax information to authorities in other countries. Under the CRS and FACTA agreements, Cayman proactively shares tax information with other governments, which assists them in the collection of their own taxes.

When it comes to taxes, Cayman has its own regime which collects the right taxes from the right people at the right time within its jurisdiction. Unlike other jurisdictions, Cayman has chosen to use fees and other taxes instead of an across-the-board corporate income tax. Cayman's tax regime meets or exceeds the revenue targets used by other leading countries around the world, generating government taxation revenue equal to approximately 23% of our GDP (2016). It's a taxation revenue raising system that works well for the jurisdiction and very adequately funds government operations while keeping the debt-to-GDP ratio modest.

The Cayman Islands also meets none of the descriptions used by entities like the OECD or Transparency International to define a tax haven. The Cayman Islands purposefully lacks any laws or agreements to support the shifting of tax base by foreign entities to avoid corporate taxes in their home jurisdictions. This responsible approach to taxation is central to the Cayman Model and a distinguishing feature of the jurisdiction among IFCs.

Another distinguishing, often-undervalued element in developing a responsible international financial centre is the quality of the professionals working in the industry. However, under the Cayman Model extraordinary value is placed on business culture and professionals maintaining it. Cayman is home to the world's top professionals in areas such as corporate and director services, legal services, public accounting, banking, wealth and asset management, insurance, reinsurance and captive markets. They are vital to the success of the industry and the culture of compliance.

The growth in Cayman's financial services industry is a reflection of the quality of the jurisdiction's professionals. In addition to attracting investment, the jurisdiction has also attracted the praise of its peers, ranking as the Top Specialised Financial Centre by The Banker for 9 years in a row. Cayman has also been voted Best Hedge Fund Services Jurisdiction and top Offshore Captive Domicile.

To attract and retain the highest quality professionals, Cayman invests in them. The Cayman Islands provides outstanding quality of life for professionals and their families through world-class infrastructure, health care, education and culture. These investments pay off with a knowledgeable and committed workforce that shares the vision of the Cayman Model. The quality of the Cayman Islands financial services industry professionals is not limited to their leadership and business culture, but extends to the levels of professional diversity in Cayman. Not being reliant on a single sector within financial services enhances the ability to draw in a wide range of talented professionals, which helps Cayman maintain an exceptional world-class business culture. It also strengthens Cayman's ability to enforce the highest standards of transparency and information sharing without fear of alienating a critical contributor to the economy. The Cayman Islands is not only the leading jurisdiction for international hedge funds, but the second largest domicile in the world for captives, the number one domicile for healthcare captives and group captives, and a leading jurisdiction for banking, trusts, capital markets and governance services. As a leading jurisdiction for captives and healthcare captives, Cayman is also a leader in the Insurance Linked Securities space, meshing expertise in securitisation, insurance and capital markets to create the most innovative structures, addressing complex risk scenarios.

The Cayman Islands is also developing into a premier choice for domiciling non-traditional reinsurance companies. Cayman's insurance service providers are known for their responsive, inclusive and collaborative approach to developing and supporting new client driven products. Diversification has been key to both Cayman's economic success and its success in establishing itself as a globally-recognised leader in combatting financial crime.

From investors like Her Majesty to pensioners and university students, a very wide range of people benefit from investments in Cayman. Individuals as well as institutions such as government and state pension plans, regular pension funds and university endowments invest together in Cayman funds to access investment opportunities from around the world in a neutral location.

Finally, the Cayman Model is strengthened by effective cooperation between industry and government. The Cayman Islands Government, and especially the Ministry of Financial Services, is very accessible and receptive to input from the industry. Industry and government work collaboratively to develop innovative and effectively regulated new financial services products and services, such as the Cayman Islands LLC established last year, to help grow the industry in a sustainable manner that effectively balances opportunity and risk mitigation. Industry and government also work on immigration laws that allow the Cayman Islands to have a strong blend of local and international professional talent that is class leading and further attracts clients. While some aspects of the Cayman Model may be challenging for other jurisdictions to replicate, encouraging industry-government collaboration is an element of the approach that other jurisdictions can consider. The Cayman Model shows how an emphasis on individual jurisdictional leadership and multilateral cooperation can make the greatest contribution both to the global economy and international efforts to combat financial crime. It provides an exceptional road map for other jurisdictions to follow to meet the highest global standards.

ABOUT THE AUTHOR

Jude Scott, Cayman Finance CEO, is well respected locally and globally having spoken internationally on financial services topics and featured on a number of occasions in international media.

He retired as an Audit Partner in 2008 after spending over 23 years with Ernst & Young. As the Global CEO of Maples and Calder, he took an active role in the strategic growth and development of the firm. Having served on various Cayman Islands Government and private sector committees, including the Cayman Islands Financial Services Council, the Cayman Islands Society of Professional Accountants, the Education Council, the Insolvency Rules Committee and the Stock Exchange, Jude has attained extensive experience within the Cayman Islands' financial services industry. He has served as the CEO of Cayman Finance since 2014, and is committed to protecting, promoting, developing and growing the financial services industry of the Cayman Islands.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Cayman Finance
Cayman Finance
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Cayman Finance
Cayman Finance
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions