Last week’s G20 summit in London caused a lot of anxiety in the Cayman Islands, particularly in the financial services industry here.
There was much uncertainty whether Cayman would end up on the Organisation for Economic Cooperation and Development’s dreaded blacklist of uncooperative jurisdictions that have not agreed to international agreed tax standards.
Instead, the Cayman Islands ended up on a grey list along with 38 other jurisdictions that have committed to internationally agreed tax standards, but have not yet substantially implemented them.
Being on the grey list is not as good as being on the OECD’s white list, but since most of Cayman’s offshore financial centre competitors also found themselves on the grey list, it is doubtful it will have serious consequences. But, as anyone who knows anything about colours knows, grey is made by mixing white with black, so there is the suggestion that all is not above board in Cayman’s financial industry.
Given everything the Cayman Islands has attempted to do over the past decade to establish itself as a legitimate offshore financial centre, many here probably feel it unfair to add a brushstroke of black to our regulatory landscape. This is especially true since many of the 40 countries on the white list conduct financial business in a far less regulated way than Cayman does.
Cabinet Minister Alden McLaughlin maintained in a post-G20 press conference last week that Cayman belongs on the white list, and he’s probably right. Mr. McLaughlin also suggested that given the political environment created by the global economic crisis, there was virtually nothing Cayman could have done differently to avoid landing on the grey list, at least initially. He’s probably right about that, too.
However, given the steps Cayman has taken in the past and more recently to adopt internationally agreed tax standards, there’s a good chance we’ll make it to the white list in short order.
Countries like Germany and Ireland have even said complimentary things about Cayman’s efforts to comply with agreed tax standards and so has the OECD. That makes it all the more disappointing, as Mr. McLaughlin pointed out, that the United Kingdom, Cayman’s administrative power, has not seen fit to do the same.
Instead, UK Prime Minister Gordon Brown continued to ratchet up the rhetoric even after the completion of the G20 summit about how he is going to call for reform in Britain’s offshore territories and make sure they’re conducting their financial affairs the ways agreed at the summit. In the next breath, he talked about holding people to account in countries that have not upheld the necessary standards, implying that places like Cayman are not doing so.
Cayman has a governor that reports to the Foreign and Commonwealth Office. Certainly, even if the UK Parliament doesn’t pay close attention to what is happening in its territories, Governor Stuart Jack and previous governors have reported to the FCO about what really goes on in the financial services sector here.
The fact that Gordon Brown has basically hung the Cayman Islands and its financial services industry out to dry is undoubtedly a manifestation of his own political expediency, but it is still undeserved, extremely disappointing and an insult from the Mother Country.