Public consultation rejects beneficial ownership registry

The Cayman Islands government announced it will not implement a central register of beneficial ownership information, but will continue its current method of providing this type of information to law enforcement, tax and regulatory authorities. At the same time, government proposes to enact new legislation that will improve access to the information and speed up the process. 

The decision to maintain the existing regime is in part based on the responses government received to a public consultation on the maintenance of legal and beneficial ownership information which ended on Feb. 28, 2014. 

The consultation, which was conducted by the Ministry of Financial Services and Commerce, showed that 81 percent of the respondents, including local and international companies, individuals, and nongovernmental organizations, rejected the idea of central or a public central register of beneficial ownership information.  

In an attempt to highlight the true owners of shell companies and other entities, the U.K. has taken steps to consolidate beneficial ownership information in a central register, and Prime Minister David Cameron has called on the U.K.’s Crown Dependencies and Overseas Territories to do the same in their jurisdictions.  

However, Minister of Financial Services and Commerce Wayne Panton said Cayman has been adhering to global standards for more than a decade by providing this information to law enforcement, tax and regulatory authorities from data collected, verified and maintained by licensed and regulated corporate service providers. 

“Both of these methods are acceptable under the FATF Recommendations [governing anti-money laundering],” Minister Panton said.  

However, government said it will speed up the information exchange process by aiming to enact legislation that will require corporate service providers to produce beneficial ownership information to tax, regulatory and law enforcement authorities “within a target turnaround time of 24 hours in circumstances where such information is required.”  

In addition, corporate service providers will be required to file legal ownership information of exempted companies annually with the General Registry and to designate a natural person locally who will be accountable to Cayman authorities for the availability and monitoring of ownership information. 

Government further aims to enact legislation that will allow government authorities to wind up entities that do not comply with beneficial ownership requirements. 

Government’s report on the results of the consultation notes that although they are global in nature, the FATF Recommendations on combating anti money laundering and terrorism financing allow jurisdictional flexibility in terms of how the intended outcomes are achieved.  

Respondents to the consultation said the current system provides more benefits than a self-reporting system, as corporate service providers undertake due diligence and refresh beneficial ownership information following a risk-based analysis. The consultation raised practical issues of a centralized register for mutual funds for which beneficial ownership changes constantly.  

In addition, a public registry would create not only a financial burden, but also introduce privacy and security risks, the consultation report said. 

Cayman’s existing regime for corporate services providers adheres to the G20’s High-Level Principles on Beneficial Ownership Transparency, which was issued in November last year. 

Government concluded in the report that “until such time as there is global agreement on appropriate exemptions and safeguards, and this becomes the internationally practiced standard, the Cayman Islands will continue to follow its [corporate service provider] regime.”  

At the same time, government announced it will implement the abolishment of the bearer share regime in the Cayman Islands in 2015. In accordance with FATF Recommendation 24, bearer shares, which never register or track ownership of the shareholder, have been immobilized in Cayman since April 2001 and used only on a very limited basis. Nevertheless, respondents to the consultation said that bearer shares and bearer share warrants can be abused. 

Wayne-Panton-240
Mr. Panton

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