“Politics stops at the water’s edge” is the now-famous saying by Arthur Vandenburg, the former Republican chairman of the Senate Foreign Relations Committee, who called for a stop to partisan politics when international relations were concerned.
We agree, and as a newspaper, we give our full support to the Cayman delegation comprised of Premier Alden McLaughlin, Financial Services Minister Wayne Panton and George Town MLA Roy McTaggart, who are in London to attend an Anti-Corruption Summit hosted by Prime Minister David Cameron.
On the face of it, the aim of the conference appears innocuous: galvanize a global response to tackle corruption by agreeing a package of actions.
Who would not support such a laudable goal? And world leaders from as far as Afghanistan, Colombia and Nigeria are lining up to join U.S. Secretary of State John Kerry and the heads of government from countries across the European Union.
But as usual the devil is in the details. The conference will seek to agree on measures dealing with government transparency, the enforcement of international anti-corruption laws and, most importantly for Cayman, corporate “secrecy.”
With regard to the latter, the U.K. has secured support from at least 40 nations to establish a global standard for the exchange of beneficial ownership information. Conference participants are expected to sign up to the new rules to disclose the true owners of companies and trusts.
It is not clear what such a standard will look like. What is clear is that the conference agenda has already called into question a deal that saw the U.K. accept Cayman’s proposed enhancements to its existing beneficial ownership regime only two weeks ago.
Cayman’s position has always been that it would adopt whatever becomes the global standard in financial transparency. If a new beneficial ownership standard becomes “truly global,” Cayman will have no choice but to accept it, regardless of legitimate privacy concerns or whether it considers its own system more robust.
Until now it was sufficient for Cayman (and other offshore jurisdictions) to make the case that without the participation of the United States, such a global initiative would lack the gravitas and credibility it needs to be taken seriously.
Now, however, U.S. participation is becoming increasingly likely. Last week President Barack Obama announced immediate executive action to combat money laundering and tax evasion with tighter transparency rules, new Treasury rules preventing foreigners from hiding financial activity behind anonymous entities in the U.S. and stricter customer due diligence rules for banks.
With the European Union pressing for a new transparency standard and the United States on board, it will be difficult to sway the discussion, but the Cayman Islands government needs to be in the room rather than on the outside looking in.
There could also be more at stake.
Premier Alden McLaughlin correctly observed that the atmosphere in the U.K. and Europe has become increasingly “vitriolic” following the Panama Papers scandal.
On Monday, Oxfam published a letter signed by more than 300 economists who, despite their different views “on the desirable levels of taxation,” agreed that “territories allowing assets to be hidden in shell companies or which encourage profits to be booked by companies that do no business there, are distorting the working of the global economy.”
“By allowing rich individuals and multinational corporations to operate by different rules, they also threaten the rule of law that is a vital ingredient for economic success,” the economists wrote and called not only for new beneficial ownership transparency rules, but also for the country-by-country reporting of profits by multinationals.
From Cayman’s side of the “water’s edge,” we at the Compass will be watching closely and reporting promptly on the drama taking place nearly 5,000 nautical miles away in London. The outcome will be of great consequence – not only to our financial services industry but to our country.