OECD grey list hot button issue

White-listed offshore centres are scooping up new business as uncertainty about Cayman’s standing on the for Economic Co-Operation and Development’s grey list drags on.

oecd grey list

AIMA members (left to right) Andy Stepaniuk of KPMG; Stuart Sybersma of Deloitte; Gary Linford of DMTC Group; Anthony Travers of CIFSA; Mark Lewis of Walkers; and Rohan Small of Ernst & Young. Photo: Shurna Robbins

Offshore jurisdictions Jersey, Guernsey and the Isle of Man all made it on the initial OECD white list, and are using it to get new business deals, while Cayman struggles to get off the grey list, said financial industry expert Anthony Travers at a recent Alternative Investment Management Association luncheon at the Westin Casuarina Resort.

‘I have heard anecdotal evidence that Cayman law firms are losing 30 to 50 per cent of new deals,’ said Mr. Travers. ‘While I don’t exactly how much of this is due to being on the grey list, this is an attrition rate that Cayman cannot sustain.’

The costs of not being on the OECD white list from the start could be in tens of millions of dollars in business, he said.

Noting that OECD’s minimum number to get on the white list is 12 bilateral agreements on tax information exchange, Mr. Travers said the Cayman government should have done everything it could to exceed that number to be on the safe side. He added that the fact that only eight bilateral agreements have been signed is just not good enough.

Furthermore, using the 12 ‘unilateral mechanism’, which is essentially a list of countries that Cayman has committed to providing tax information exchange, without a bilateral agreement in place is too much of a ‘high risk strategy’ to rely on to make up for the shortfall of four bilateral agreements said Mr. Travers.

He also pointed blame at much of the private sector for not taking a proactive approach with US and UK legislators critical of tax havens, such as US Senator Carl Levin, US president Barack Obama and British Prime Minister Gordon Brown.

He said it is well past the point of writing a few letters to politicians and using public relations companies to educate legislators on the function of offshore centres, explaining how 12,000 companies can be registered in Ugland House, Maples and Calder building and comparing it to 800,000 Delaware companies.

‘Obama is not being silly. He is a master in public relations,’ said Mr. Travers, adding average working Americans and Britons understand the concept of a factory where cars are products are being made, but not the complexity of mobile capital.

Mr. Travers proposed that part of the answer in dealing with hostile legislators in countries like the US and the UK is for the private sector through an association like the Cayman Island Financial Services Association to negotiate on behalf of government. For that to work, the government would need to give the association authority to act on the country’s behalf, he said.

Mr. Travers was recently appointed as the president of the Cayman Islands Financial Services Association. His speech at the AIMA gathering signals a more assertive stance in the Financial Services Association to deal with international issues relating to the Cayman Islands’ financial industry. Mr. Travers is also the current chairman of the Cayman Islands Stock Exchange.