There is no one reason why the Cayman Islands continues to be an enduring success as an international financial centre. One could point to the quality of our professional service providers, sound regulation, political and economic stability and our tax neutral platform but, in reality, these all come together to create a unique and highly attractive client offering.

However, what is often overlooked is our commitment to meeting international standards.

Transparency and information exchange, buzz words in certain circles these days, are more than just concepts and aspirations for the Cayman Islands. Rather, as an early adopter of many initiatives designed to build transparency into the global financial system, they are par for the course.

Take Beneficial Ownership. Cayman Islands authorities have had access to information relating to beneficial ownership for companies incorporated in the jurisdiction for over 15 years. Our framework requires that regulated service providers are legally mandated to collect, verify, monitor and update information on beneficial owners, underpinned by criminal sanction, ensuring that the data available to authorities is adequate, accurate and current.

We have also been sharing information with overseas tax and law enforcement authorities for many years now. Beginning with the 2001 Tax Information Exchange Agreement with the United States, the Cayman Islands has now entered into 36 bilateral agreements. These, together with the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, facilitate information exchange and transparency with over 115 partner jurisdictions.

Meeting international standards

The Cayman Islands adheres to international standards as they relate to anti-money laundering (AML) and counter-terrorist financing (CTF) and in certain areas, we have exceeded the efforts of our international partners in adhering to these standards. Our completion of the retrospective “know your customer” (KYC) and due diligence checks as required by the Financial Action Task Force (FATF) standard when many other countries concluded that the exercise was too arduous and expensive is testament to that. There is no doubt that retrospective KYC checks placed significant financial and other resource burdens on service providers locally, however, ultimately, building a financial services industry which served the interests of law-abiding users and providers of investment capital was, and continues to be, positive for Cayman.

Why ‘choose’ cooperation?

Some still ask why we have been at the forefront of moves towards greater openness and transparency and if being amongst the first to take such action has put the Cayman Islands on a competitive back foot.

The answer is that the Cayman Islands has a zero-tolerance approach to illegal activity. It would not only be wrong to allow our jurisdiction to be used for money laundering, the financing of terrorism and tax evasion but it would also be an act of self-harm.

Transparency initiatives protect us from criminal activity, protect investors (and by extension the millions of people globally who benefit from such investments, such as pension plans) and protect public revenue here in the Cayman Islands. Transparency benefits our financial services industry and the Cayman Islands generally and this is why we were one of the first jurisdictions to sign up to the OECD’s Common Reporting Standard (CRS) and why the Ministry of Financial Services and the wider Government has worked hard to develop the legal and procedural framework necessary to satisfy the latest Economic Substance requirements.

Some worry about the unintended consequences of such transparency initiatives. However, we are clear that any risk associated with the adoption of international standards is far outweighed by the damage that would be done to the jurisdiction were we to ignore the direction of travel and carve out our own path for one.

Next steps

There is much more to be done to ensure compliance with international standards. Our evaluation against the FATF standard highlighted deficiencies in our system which we are in the process of addressing and our efforts continue in relation to the EU’s work on non-cooperative tax jurisdictions ahead of the review process due to commence next year.

Protecting the integrity of the Cayman Islands

We believe that our commitment to implementing international standards should speak for itself. Unfortunately, however, a negative perception persists in certain circles that we are in some way uncooperative and/or being brought to the table kicking and screaming. It may be that we have been too reticent to promote ourselves as a jurisdiction at the forefront of collaborative efforts in this area. Mistaken assumptions stemming from our tax-neutral model have also been unhelpful.

To combat this perception, Government and the Ministry of Financial Services have been engaging heavily with the international community and we are seeing the fruits of our labour. Technical and political engagement will, therefore, continue to be a priority for us.

While it is true that Cayman is both a willing and active participant in international fora on the development of global standards, it also the case that we don’t have any other option. Not only do we take seriously our obligations as responsible members of the international community but if we are to continue to protect our financial services industry, we must continue on this journey.