Legislation went into effect on July 1 that establishes a beneficial ownership platform intended to access the true owners of the nearly 100,000 Cayman-registered companies – a system aimed at improving the speed of providing beneficial ownership to U.K. law enforcement authorities.
However, it’s not clear how many Cayman companies have had their information uploaded into the platform, or what government is doing to encourage compliance with the new system. The Ministry of Financial Services and Home Affairs did not respond to phone calls and emails over the last two weeks seeking information to that effect.
In the British Virgin Islands, which established a similar platform, only a little more than half of the roughly 400,000 companies registered there have been uploaded into that territory’s beneficial ownership platform as of the end of August, according to a letter from Neil Smith, executive director of the BVI Office of International Business Regulations, to the jurisdiction’s registered agents.
Mr. Smith’s letter, a copy of which was obtained by the Cayman Compass, states that government extended the deadline for companies to have their information in the system from June 30 to Dec. 31 “in light of other pressing industry obligations.”
But in some instances, registered agents have made “no move” to begin putting their companies’ beneficial ownership information into the BVI platform, states Mr. Smith, whose office oversees information exchanges between the BVI and other jurisdictions.
“This is totally unacceptable, and it bears repeating that there will be no extension given beyond Dec. 31, 2017,” Mr. Smith wrote. “The extension of time was given not to encourage complacency, but to facilitate those few companies that might need more time to onboard the requisite information due to clients’ unavoidable tardiness and the like.”
The letter adds that if BVI cannot provide requested beneficial ownership information to U.K. law enforcement authorities upon demand – as stipulated in both the BVI and Cayman’s agreement with the U.K. – this would have “immediate significant consequences for this jurisdiction.”
The platform is the result of years of negotiations between the U.K. and its British Overseas Territories and Crown Dependencies, some of which have been criticized by U.K. officials and other organizations for their alleged lack of transparency.
During the negotiations, former U.K. Prime Minister David Cameron pushed for the territories to establish public registries, but government officials in Cayman and the BVI said they would not consider public registries until such a system becomes a global standard.
In April 2016, the BVI, Cayman, Bermuda, Anguilla, and the Turks and Caicos Islands all agreed to establish a central beneficial ownership registry or to make a “similarly effective arrangement.”
For Cayman, that arrangement entails an “offline air-gapped platform” where each registered agent maintains its own beneficial ownership information, and once a month sends a representative to hand-deliver an encrypted flash drive to government with an update of new data to the offline database.
The BVI, for its part, built an encrypted online platform whereby each registered agent holds its clients’ beneficial ownership information in its own separate server, which is then linked to government’s server.
The BVI and Cayman systems also differ in how they enforce compliance: Mr. Smith stated in his letter that noncompliant registered agents will be penalized after Dec. 31; the Cayman legislation does not allow government to impose fines until July 2018.