The Cayman Islands Attorney General recently blasted critics of the country’s financial sector who he said were merely jealous of the jurisdiction’s success as an offshore centre.
In a rare contribution to the ongoing budget debate in Legislative Assembly, AG Samuel Bulgin said those comments were being made by detractors who were often from countries that are competing with the Cayman Islands for business.
‘For many years now this tiny jurisdiction has been feeling the wrath of the rest of the world, mainly because of our successes as a financial centre,’ Mr. Bulgin said. ‘In the eyes of our detractors, there must be some sleaze that has taken place here.’
‘It’s all about jealousy; they are deeply jealous about the success of these islands.’
Mr. Bulgin said a number of independent reviews, many of which Cayman has voluntarily submitted to since 2000, have found that the country has one of the best regulated financial centres in the world. He pointed to the country’s strong bond rating, as well as its political, economic and social stability as major reasons for investor confidence.
He said the jurisdiction also offers the highest level of legal and financial advisers to those who were engaging in a ‘legitimate commercial exercise.’
‘The Cayman Islands offers them the option to lower their tax burden, while at the same time meeting their tax burden in their home country,’ Mr. Bulgin said. ‘It’s tax neutrality, not tax avoidance. They avoid double or triple taxation on their returns…that is a legitimate commercial exercise.’
The Attorney General said there were indeed cases of tax avoidance in Cayman, but insisted the country had done nothing to encourage those instances and had cooperated with authorities in other countries if evidence of such evasion was found.
The issue of lax prosecution of financial crimes in British Overseas Territories was recently addressed by a United Kingdom House of Commons Public Accounts Committee.
‘In most of the territories, the standards of regulation across areas such as banking, money laundering, insurance and securities are not as good as those in the Crown dependencies(Jersey, Guernsey, Isle of Man),’ said committee Chairman Edward Leigh in a prepared statement. ‘The (Foreign and Commonwealth Office), actively supported by other relevant agencies, must do more to help the territories, especially the smaller ones, strengthen regulation.’
However, most of the UK lawmakers’ concerns expressed in a December meeting of the Committee of Public Accounts were not specific to Cayman’s situation.
The Cayman Islands were generally given among the highest marks by the UK committee in terms of its progress with banking and financial regulation since 2000. In fact, a review by the International Monetary Fund done in 2005 stated that Cayman was the only overseas territory to bring successful prosecutions for illegal financial activity.
Mr. Bulgin said there had been five prosecutions of money laundering in Cayman since 2003.
Cayman has a Confidential Relationships (Preservation) Law, which sets out strict guidelines under which certain privileged information must be protected by both government and private sector employees. However, Mr. Bulgin noted that law also guarantees the provision of information to anyone who demonstrates they are entitled to receive it, such as law enforcement officials.
A recent review done by the Caribbean Financial Action Task Force found the Cayman Islands was compliant with 32 of the task force’s 40 recommendations on preventing money laundering and was compliant with six of nine recommendations with regard to combating financial terrorism.
Mr. Bulgin said the International Monetary Fund stated in a 2003 report that ‘financial regulations in the Cayman Islands are in accordance with the highest international principles.’
The Attorney General said there was a ‘continually shifting goal post’ put in place for Cayman by the international regulatory community.
‘We continue to do what is reasonable to maintain the reputation of these islands, but also what is needed to remain competitive,’ he said.