If the UK and other large economies get their way, they’ll force a plan that local officials insist will cause catastrophic damage to the Cayman Islands. At hand is the issue of beneficial ownership and Britain’s push to have a public register with the names of the owners of all companies and accounts in off-shore financial sectors.
The Cayman Islands opposes this vehemently, considering the financial services sector contributes more money to the economy than all other industries combined. It’s a message that has been delivered time and time again to the power brokers in London and other members of the G-20 group of larger economies.
Undoubtedly, the issue – though not officially on the agenda – will be raised when Premier Alden McLaughlin and other leaders from British Overseas Territories meet with officials from the UK Government’s Foreign and Commonwealth Office (FCO).
Just last week, the UK Overseas Territories Minister James Duddridge told Mr McLaughlin and the Premiers of Bermuda and the British Virgin Islands that his government’s position has evolved. It is now seeking direct access by its law enforcement agencies to the beneficial ownership information.
In a ministerial statement on the issue delivered in the Legislative Assembly on Friday, the Premier reiterated his government’s stance on the issue.
“The Cayman Islands, as we have said time and time again, is fully committed to complying with international standards with respect to the provision of financial services and particularly as it relates to transparency and beneficial ownership information,” he told his legislative colleagues.
“However, what we are not prepared to do is to adopt a scheme which our competitors do not subscribe to, put ourselves at a competitive disadvantage and thereby cause business to migrate to competitor jurisdictions.”
He said Cayman will not agree to a public register “unless and until that becomes the global standard and all our competitors also subscribe to that standard”.
Mr McLaughlin added: “We will not agree to unfettered access to Cayman Islands beneficial ownership information by external law enforcement, tax or regulatory authorities. Requests for such information must continue to meet established criteria and to be dealt with by the relevant Cayman Islands authorities established for that purpose and approved as being in accordance with global standards.”
Whether the Premier, who’ll be accompanied by Financial Services Minister Wayne Panton at the London talks, is able to stand his ground and not have his hand forced is yet to be seen. In the meantime, Cayman Finance CEO Jude Scott has warned of a retrograde step, if Cayman bows to UK pressure.
“What has been proposed, originally insisted on by the UK, was actually a process that would take us backwards and cause us to have a system that is far less effective than it is now,” he said in an interview with Cayman Weekly.
“It’s intended to be a central registry of publicly accessible information. However, when you look at the quality of information, it is not necessarily that good because it is a self-reporting system.”
In stark contrast to the allegations of a cloak of secrecy of Cayman’s financial services industry that permeates in places like London and Washington, Mr Scott indicated there exists a very rigorous process of providing documentation for verification prior to off-shore business being accepted.
“If we truly on a global scale are trying to ensure that people who are criminals, are money laundering, who are terrorist financing, are not using our vehicles, do we really believe putting in a self-reporting system that these very smart criminals will are going to say ‘I have to fill out a form, you’ve got me. I’ll just put in all my legitimate information [and] I’ll surrender’?
“The reality is the completeness of the information will not be there; the accuracy of the information we’ll have to question…and it also has no environment for validation. It really is just a system for appearances sake,” he said of the UK’s proposal.
The head of the private sector group that promotes the development of Cayman’s financial services industry said he supports the position taken by the government. “It’s a valid position,” he said.
“The challenge is that countries like the UK, they are under tremendous pressure from NGOs, and they’re also under political pressure to appear to be doing something. That’s where we have to be careful that we don’t make bad decisions just because there’s political pressure.”
The Cayman Finance CEO claimed that what London wants to do would open up honest people and legitimate businesses to victimisation and to criminals who would use the publicly accessible information against them.
“And you’re not achieving what we want to achieve,” Mr Scott said of the goal of detecting and preventing money launderers, criminals and terrorist financers.
But are small island states like the Cayman Islands fighting a losing battle against global powers? That’s a question we put directly to Mr Scott.
“I don’t think so. I think it’s an important battle and I think it’s important, at a jurisdiction where we need to be investing time and resources. When you look at it from a technical point of view, what we have in place is vastly superior. So we’re talking about a political battle with rhetoric within on-shore countries and that’s where we have to invest our time to be accurately telling our story because we can’t be silent victims that can’t be caught up in political rhetoric,” he said.