Cost, fairness cited by law society
Cayman’s largest private sector representative organization and one of its largest attorneys associations on Friday criticized United Kingdom proposals aimed at making public the list of individuals or companies that benefit from registered financial entities in the islands.
“We should not infringe on legitimate privacy by embarking on an untested and unchartered path which is inconsistent with any global standard and which certainly does not exist in competing jurisdictions,” Chamber of Commerce President Johann Moxam wrote in a letter last week about the issue to government’s Financial Services Minister Wayne Panton.
“In order to work properly and achieve any semblance of its objective, such a proposal for a publicly accessible register of beneficial ownership would need to be universally applied by all jurisdictions,” said Alasdair Robertson, Maples and Calder partner and president of the Cayman Islands Law Society.
U.K. Prime Minister David Cameron said last year that it was his intention to make such a list public in Britain and the Mother Country has “suggested” that its territories, including Cayman, follow suit. Overseas Territories Minister Mark Simmonds said during a visit to the Cayman Islands last year that such a move would ultimately be a local decision.
The registry of so-called “beneficial ownership” contains reporting requirements that have existed in the Cayman Islands for more than a decade, but are currently only accessible via a court process that can be lengthy and expensive.
The U.K.’s proposal would make names of those profiting from any financial entity in the Cayman Islands open for anyone to view at any time.
“It is disturbing and regrettable that Cayman is being put under political pressure by competing jurisdictions and political leaders to go one step further than everyone else, which draws the inference that we are doing something wrong and should be the only ones to make such a change,” Mr. Moxam said.
The law society noted in its lengthy evaluation of the issue, that Cayman is already compliant with international tax and financial information reporting standards and that Cayman’s finance-related businesses are already required to obtain beneficial ownership data under the territory’s anti-money laundering laws.
In addition, many objectives of Mr. Cameron’s beneficial ownership proposal and earlier initiatives from the U.K.-based Organisation for Economic Co-Operation and Development are the same.
In any case, Mr. Robertson said such a register – even if it is implemented for all countries on Earth – could have grave impacts on the financial services industry.
“The proposal for a publicly accessible register will ultimately undermine competition and innovation, and will likely have disastrous consequences on global capital markets and the ability to secure financing,” Mr. Robertson said, giving the law society’s views on the U.K. plan.
Moreover, Mr. Robertson said, there would be cost implications for setting up and maintaining such a public reporting system “disproportionate to the perceived benefit.”
The law society president said those proposing the beneficial ownership reporting plan might not comprehend how financing and investment occurs in modern markets. Most investment funds are operating through a nominee, representing a number of owners who change rapidly. “The complexities presented by such structures would inevitably lead to non-compliance,” Mr. Robertson said.
Finally, the need to synchronize reporting efforts across the globe would be daunting, at best, Mr. Robertson said.
“In essence, each public registry system will need to be able to ‘talk’ continuously with the systems in every other jurisdiction, otherwise the system and its objective fails,” Mr. Robertson said.
Last Friday was the deadline for all public comments on the beneficial ownership proposal to be submitted to the Cayman Islands government. Government officials have said they would use that information to inform their answers to the U.K. government on whether Cayman would seek to implement a public register of beneficial ownership.
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Costs implications to whom? CIG or the lawyers and accountants who earn their living managing these schemes?
Whether Messrs Moxam and Robertson like it or not the fact is that some extremely unsavoury people and organisations are still able to channel funds through offshore jurisdictions like the Cayman Islands despite the current reporting standards.
Is it really a case of this proposal infringing on legitimate privacy or is it that going down this route might cause embarrassment to the section of the local business community that these two gentlemen represent?
David, fully agree with the points made below. Cayman has an opportunity to take the lead and move towards a fully transparent model (with automatic exchange of info, and a public register for B/O of all entities registered), working hand in hand with developed countries to combat tax evasion and tax avoidance schemes which appear to be legal to the untrained eye, but in quite a few cases are blatantly unethical.
What’s even more worrying for Cayman and the UK (who may be left holding the bag) are the following statements made by world-renowned economist Professor Jeffrey Sachs:
Instead, if Cayman is being used by powerful and out-of-control forces vastly beyond the Caymans’ capacity to regulate, monitor or backstop in the event of crisis. A blow-up in the Caymans’ finances would make Cyprus’s crisis look like child’s play.
Jeffrey D. Sachs, Director, The Earth Institute, Columbia University, New York, NY, US
The aforementioned statements must be tested but to date there has NOT been a full response to Professor Sachs by the private sector or government.
Mr. McDonald, Jr.
Why don’t you get seconded to a UK-based firm and come out here and do some tax work in the UK to get a better understanding and grounded knowledge of how this system works…in the UK.
It might change your views on Cayman selling out to the UK Govt. and giving David Cameron what he cannot get here in the UK.
If you actually knew how much taxes the UK firms are hiding from the HMRC and Cameron’s Government…
Or in other words, how dishonest the entire United Kingdom is…
Your views might change considerably.
Unless you live here and pay taxes and support THIS economy, you have no clue.
Cameron has his own his to clean before he seeks to clean Cayman’s…
And he’s not doing a very good job of it.
Correction of a ‘typo’ in my last post, which should be…
‘Cameron has his own house to clean before he seeks to clean Cayman’s’…
What’s even more worrying for Cayman and the UK (who may be left holding the bag) are the following statements made by world-renowned economist Professor Jeffrey Sachs:
Instead, if Cayman is being used by powerful and out-of-control forces vastly beyond the Caymans’ capacity to regulate, monitor or backstop in the event of crisis. A blow-up in the Caymans’ finances would make Cyprus’s crisis look like child’s play.
Mr. McDonald…
These quotes are very general statements made by some American professor…they provide no factual evidence to back them up.
Let me clue you in on the real situation.
David Cameron cannot find out which UK companies are a part of these ‘out-of-control’ forces so dramatically referred to here.
And the only bag that the UK is/will be left holding is the tax-revenue bag that is a bit lighter than the UK would like it to be.
Surely you can’t be naive enough to believe that there are not United Kingdom companies who have huge sums of money in the Cayman Islands as part of their financial advisors ‘asset-managment’ schemes, can you ?
And that these advisors are doing all that they can to hide this information from David Cameron and Her Majesty’s Revenue and Customs, with a great degree of success.
And that Cameron’s bleating on about ‘beneficial ownership’ registers from Cayman is about trying to have Cayman provide him with the information that he cannot get from these UK-based businesses in his own country.
Come out here and do some tax work; you will learn a whole lot about how things really are.