Unclaimed millions in banks

Millions of unclaimed dollars are sitting in Cayman banks and the money could be helping to finance worthy Government programs, such as schools and recreational parks.

Some of this money has been sitting in dormant accounts in the Cayman Islands for more than 15 years.

The banks can’t take the money for themselves and they can’t get rid of it.

‘We operate under the US General Accepted Accounting Principals (GAAP),’ said President of the Banker’s Association, Conor O’Dea. ‘We cannot extinguish a liability.’

Although Mr. O’Dea would not say the exact amount of money there is in these dormant accounts, he said it was millions of dollars.

If an account holder dies and the heirs and successors are unaware money exists, or if for some reason an individual forgets about money in a Cayman bank account, it stays there, that is, until the owner of the money or the estate of a deceased comes looking for it.

Prior to the 1999 Harmful Tax Competition Initiative of the OECD, Cayman’s notoriously secretive banks did a lot more private wealth management business, rather than the more institutional type of international business that is prevalent now. There are stories of people walking into the banks with briefcases full of cash and using the Cayman Islands to move ‘dirty’ money around.

In the 1980s and even into the ’90s ‘hold mail’ was a fairly common instruction for the clients of a bank. There are a variety of reasons why these individuals may have wanted to keep their Cayman money secret; it is possible they wanted to hide some money from their spouses and undoubtedly some were trying to avoid paying taxes in their home countries.

With increasing pressure being applied from the OECD Tax Initiative and newly instituted due diligence requirements, some of these people were faced with a dilemma. Confronted with the prospect of producing references and other information, some of these individuals had embarrassing situations which made it hard to explain their accounts. Many of these people have since decided to come clean and settle with tax authorities during periods of amnesty, or made financial payments in order to repatriate the money held in the accounts.

‘If the customers can’t produce the required due diligence, the accounts are held,’ explained Mr. O’Dea.

‘Most of the dormant accounts were taken care of when we did the retrospective due diligence several years ago. We looked at all the accounts past and present. If they didn’t answer the phone or came back with an ‘address unknown’ we would then ring fence it and we would have to report it to the Financial Reporting Unit.’

‘Some clients were jettisoned,’ explained Ted Bravakis, the Public Relations Director in the Portfolio of Finance and Economics Office. With the passage of the Proceeds of Criminal Conduct Legislation and the Mutual Legal Assistance Treaty, the Financial Reporting Authority here in the Cayman Islands began passing on information about suspicious accounts to regulators in foreign jurisdictions. This information sharing has since resulted in a number of overseas prosecutions and, in some cases, Cayman has been rewarded for its assistance by sharing in the fines and penalties that have been meted out to those found guilty of criminal activity.

In the United Kingdom, the Government is proposing that money that has sat in dormant accounts for more than 15 years will be moved in a central fund and will be used to finance community projects. Some of the money from the accounts is slated to go to the UK Department of Children, Schools and Families and will help fund a new or improved youth facility in every constituency in England by 2010.

Currently there is no available data on just how much money is sitting in dormant accounts in Cayman. It would be up to the Cayman Islands Monetary Authority to request that information from the banks and so far they have not issued any guidance on the matter.

There is also no enabling legislation in the Cayman Islands that would allow Government to get its hands on the money accumulating in these dormant accounts. Even if there was legislation, it would still remain a contingent liability on the Government books because the owners of the money or the estate may still come looking for it.

Mr. O’Dea says dormant accounts are monitored closely because ‘from a banking perspective the accounts are considered high risk; staff or outsiders may want to attack the accounts,’ to get their hands on the money.

There are ways to access forgotten money, if a person knows to ask.

Past President of the Cayman Islands Banker’s Association, Eduardo D’ Angelo De Silva, explained that the banks follow the rule set out in section 9.16 of the Bank Code; the section states that ‘if you ask us, we will tell you how to access these accounts.’