Cayman hasn’t committed to automatic sharing of ownership data

Cayman Islands did not sign Anti-Corruption Summit communique

Contrary to international media reports and a press release from No. 10 Downing Street, the Cayman Islands government did not commit to the automatic exchange of beneficial ownership information prior to the Anti-Corruption Summit in London last week.

The government also confirmed it did not sign the summit communique that sets out a common approach to tackling corruption, which, according to the U.K. prime minister’s website, was agreed by all participating countries.

The Cayman Compass understands that due to the late invitation to the summit, the Cayman Islands government was not involved in the negotiation and formulation of the joint statement of summit participants and therefore did not become party to it.

Last Wednesday, government released a statement saying, “The Cayman Islands has confirmed to the U.K. that it will join the initiative for the development of a global standard for the sharing of beneficial ownership information.”

This initiative was launched in April by the so-called G5 countries – the U.K., Germany, France, Italy and Spain – and subsequently joined by another 35 countries. Before Cayman joined the initiative, the European participating countries released a statement under the title “Initiative for automatic exchange of beneficial ownership information.”

In the statement, the initiative members commit “to establishing as soon as possible registers or other mechanisms requiring that beneficial owners of companies, trusts, foundations, shell companies and other relevant entities are identified and available for tax administration and law enforcement authorities” and the “automatic exchange of information on beneficial ownership.”

However, Wayne Panton, the minister for financial services, explained in an interview with the Cayman Compass on Thursday that Cayman has not committed to an automatic exchange of ownership information. “We have agreed to making a political commitment to this process [of developing a global standard],” he said. But a new global standard on sharing beneficial ownership information is “a long way down the road,” he added.

This does not appear to have resonated with U.K. Prime Minister David Cameron, who praised the British Crown Dependencies and Overseas Territories. “All of them have committed to having registers of beneficial ownership and crucially most of them now have committed to the automatic exchange of information and automatically sharing those registers of beneficial ownership with other countries,” he said after the conference.

A press release from No. 10 Downing Street also noted that “40 jurisdictions, including a number of Overseas Territories and Crown Dependencies with major financial centers, will automatically share beneficial ownership information.” The Economist, The Guardian and other media reported on the issue and included Cayman among the 40 countries.

The Guardian explicitly noted, “The Cayman Islands were invited to the summit after they made concessions over the automatic exchange of beneficial ownership information.”

The question of whether the data is shared automatically or not is crucial because government and the financial services industry are still defending Cayman’s existing beneficial ownership regime.

Corporate services providers on island collect and maintain the information identifying the true owners of companies and other entities. This data is shared only in specific circumstances when requested by foreign law enforcement and tax authorities under a bilateral agreement.

In April, Cayman concluded an agreement with the U.K. under which government would develop a “centralized platform” which has access to each corporate service provider’s beneficial ownership data. From June 2017, this platform will enable a quicker handling of individual information requests by U.K. law enforcement and tax authorities, but it will not exchange all of the data automatically.

The Cayman Islands government hopes that the members of the beneficial ownership initiative will also adopt this mechanism rather than develop an automatic exchange system as the global standard.

The Ministry of Financial Services announced that government informed HM Treasury in the U.K. that “in order to foster greater collaboration between law enforcement and tax authorities in the fight against corruption and tax evasion, it is welcoming jurisdictions that are participating in the initiative for the exchange of beneficial ownership information to enter agreements with Cayman that are similar to the Exchange of Notes currently in place with the U.K.”

Speaking at the Summit, Premier Alden McLaughlin said Cayman had shown its leadership role in the fight against corruption for over 20 years and offered to extend the agreement with the U.K. to all conference participants.

“Some examples of our engagement include the recent Exchange of Notes and a Technical Protocol with the United Kingdom on the exchange of beneficial ownership information, an arrangement which I am happy to announce today we are prepared to extend to all countries participating in this current initiative,” he said, omitting mentioning the beneficial ownership initiative, included in his official speaking notes.

“Because of these efforts, our credentials in the fight against corruption cannot be seriously challenged,” the premier added.

“I believe we’ve earned our seat at the table to be part of the development of any new global standard.”

In the same vein, Jude Scott, the CEO of Cayman Finance, appeared on Sky News following the summit in London, hailing Cayman’s existing regime for collecting verified beneficial ownership information as superior to centralized registers that are based on self-reporting, such as the one implemented by the U.K.

“If we look at ensuring that we have top quality information that is accurate and complete, the system that we have in Cayman is far superior to what has been proposed [by the U.K.].” Mr. Scott advocated that Cayman’s system should consequently become the global standard.

The Anti-Corruption Summit communique referenced the beneficial ownership initiative for the automatic exchange of beneficial ownership information and called on the Financial Action Task Force, the Organization for Economic Co-operation and Development and the Global Forum on Transparency and Exchange of Information for Tax Purposes to develop initial proposals “on ways to improve the implementation of the international standards on transparency, including on the availability of beneficial ownership information and its international exchange.”

However, Roy Tatum, senior political adviser to the premier, confirmed Friday that the Cayman Islands has “not in fact signed the communique.”