In public, Premier McLaughlin, British officials and leaders of other U.K. territories may be all smiles (That’s “red-carpet diplomacy.”), but in private, you can be assured that conversations took on a more serious tone. (That’s “behind-doors discussions.”)
Although not on the formal agenda for the annual meeting between Overseas Territories leaders and U.K. ministers, the topic of “beneficial ownership” is, for many of the jurisdictions including Cayman, the primary issue defining current relations with our common Colonial Mother.
To put the matter as concisely as possible, “beneficial ownership” refers to which individual (or individuals) ultimately enjoys the benefits of owning a company (or other financial entity), even if that individual’s name doesn’t appear on that company’s ownership documents.
For example, a person named John Smith might create “Company A,” which in turn sets up a subsidiary “Company B.” The ownership documents of “Company B” might only refer to a director, attorney or other agent of “Company A” — but in reality the “beneficial owner” of “Company B” is John Smith.
Needless to say, these sorts of structures can quickly become complex, as various jurisdictions and entities enter the equation, and with the introduction of cross- and partial-ownership. Complex structures can reflect the reality of complex business arrangements but can also present opportunities for malfeasance or criminal wrongdoing.
Currently, Cayman provides beneficial ownership documents to law enforcement agencies when they ask for them, subject to a number of requirements.
The U.K. has been pressuring Cayman and other territories to go another step entirely, and for each to create a centralized register containing beneficial ownership information that can be electronically accessed by law enforcement as they wish.
There are professionals within our financial services industry who are crying out that revealing beneficial ownership information will be a death blow to Cayman’s economy, and will make Cayman non-competitive – in terms of privacy – with our rival jurisdictions.
Others, such as former Cayman Finance CEO Gonzalo Jalles, have been more bullish. In June 2014, Mr. Jalles wrote in the Cayman Islands Journal, “While the current and upcoming transparency initiatives are capable of reshaping the industry in ways one can only speculate about, Cayman has the potential to emerge as the undisputed leader in the region. Only the political decisions of each of the leaders in these Territories will determine if the potential is realized by Cayman or taken away by another jurisdiction.”
Cayman leaders argue that the standard of financial transparency set by registers of beneficial ownership goes beyond norms in the G-8 countries, and none of those had established public registers of their own. Accordingly, it is unfair and nonsensical to insist that Cayman and other small territories “go first.”
Well, beginning next year, the U.K. will indeed “go first” – setting up a centralized register of beneficial ownership information of companies, that will be searchable by the public, not just police.
That may erode some of the rhetorical ground upon which Cayman’s initial argument was based. And so the discussions continue.
As far as the Compass is concerned, we remain champions of privacy rights, but we are also realists when it comes to the powers the Crown exercises over us. If and when the U.K. determines that a beneficial ownership register is mandatory for Cayman — it will become so.
Until such time, we trust that our political representatives, such as Premier McLaughlin, will continue to act in the interests of Cayman’s financial sector, the ultimate “beneficial owners” of which, are, of course, the people of the Cayman Islands.