The minister for financial services has said the decision by the UK’s Financial Conduct Authority to place the Cayman Islands on its high risk countries list, as reported by CNS Business on Thursday, defies logic. Astounded by the decision, Wayne Panton told CNS Business Thursday that government had already written to the FCA about the listing requesting a review and removal, but following the body’s refusal he was considering a judicial review. While Panton listed the reasons why Cayman should not be included, given the FCA’s published criteria, the financial watchdog said there was still a money laundering risk in the Cayman framework.
Despite the numerous accolades and high standards claimed by officials here in the Cayman Islands in relation to the jurisdiction’s adherence to multiple agreements and international standards, the FCA pointed to a US Senate Sub Committee report and a Homeland Security report that highlighted the vulnerability of Cayman to money laundering, drugs and terrorist finances, and another State Department report on narcotics control which also lists the Cayman Islands as a jurisdiction of primary concern.
Panton said that although the list is not a ‘black list’, it has reputational implications.
“Government is astounded that the UK would put Cayman on the list, as both Cayman and the UK have been rated equally in the OECD’s 2013 Global Forum on Transparency and Exchange of Information for Tax Purposes rankings,” he said, adding that Cayman has been ahead of the UK for more than a decade in the area of KYC information.
Nevertheless, the minister said Cayman had to deal with this latest attack with diplomacy, as he justified why the correspondence regarding the listing had not been made public until now.
“It defies logic and the facts,” he said. “However, regardless of the FCA’s motive, Government must deal with this matter in a responsible manner. Matters of diplomacy are often difficult to conduct in the public sphere. While Government wants to be in the position of airing important matters such as this one, to the public at an early stage, we do have to assess whether, on balance, the interests of our country is better served by attempting to resolve such matters quietly.”
However, with the quiet early diplomatic attempts to get Cayman removed from the list having failed, Panton said other options including the UK courts were now an option.
“We take this matter seriously. Having recently received the FCA’s disingenuous response, rest assured that Government is considering all options available to us, including judicial review which will seek to reverse the FCA’s decision to include Cayman on the list,” he said.
The latest black-listing will undoubtedly impact the local business arena and although Cayman as asked a number of leading offshore law firms and various bodies for a response to the listing, the responses came only from Cayman Finance and the Chamber of Commerce.
Chamber President Johan Moxam said the listing was an insult, while Cayman Finance CEO Gonzalo Jalles described it as hypocritical and called on the FCA to practice what it preaches concerning transparency.
As a public body, the FCA says it should be as open and accountable as possible and that it is open to being scrutinised by consumers, firms and Parliament.
“However, they do not practice what they preach,” Jalles said. “The methodology for the construction of this list is not disclosed and we have serious reasons to believe it is poorly constructed and fundamentally flawed. We recently conducted an independent analysis on the way the Tax Justice Network constructs its secrecy index, with lapidary conclusions.”
“We would be willing and able to submit their analysis to a similar rigorous independent analysis, however my guess is there has not been enough work behind it and the FCA is likely to resist opening it to independent scrutiny,” the industry leader stated.
Far from being at risk regarding money laundering, Cayman is at the forefront of combating and preventing financial crime, he said, and evidence shows that the jurisdiction is at a similar or higher standing than the UK in regards to beneficial ownership information.
Meanwhile, the Chamber president said the FCA’s move was a deliberate and misguided attempt to smear Cayman’s reputation and credibility as one of the world’s best regulated jurisdictions.
“The Cayman Islands financial services sector is among of the world’s best regulated and cooperative jurisdictions according to independent assessments by various international regulatory agencies. The UK’s FCA listing certainly raises legitimate concerns and questions that there may be a hidden competitive agenda at play here or attempts to force the Cayman Islands Government into complying with certain initiatives,” Moxam stated.
“The fact that literally every other mainstream offshore centre of similar stature to Cayman and indeed many other less developed offshore countries are missing from the list is at best a grave error in the compilation of the list or at worse a deliberate attempt to discredit the Cayman Islands as some type of public relations stunt.”
Moxam called on the premier, minister for financial services and minister of finance to contact the UK’s FCA and Foreign and Commonwealth Office officials to obtain specific information about the recent visit and assessment and to determine what is at the heart of this listing. he said the fact that the Cayman Islands was on such a list was “truly astounding” given this jurisdiction’s track record. “What more is the Cayman Islands expected to do to satisfy the FCA and FCO?” Moxam asked rhetorically.