Cayman Finance has issued a statement in support of government’s intention to introduce a public register of beneficial ownership, when such registers become the norm under international standards, for example in the European Union.
The association, which represents Cayman’s financial services industry, said it “supports the decision by the Cayman Islands Government to introduce a public register of beneficial ownership in line with evolving global standards and practices within a timeframe that aligns with UK legislation and the EU 5th Anti-Money Laundering Directive”.
The decision will see the true owners of Cayman-based companies made public sometime after 2022.
Beneficial ownership has long been a contentious issue. Lawmakers, anti-corruption campaigners and tax advocacy groups believe that publicly available beneficial ownership information, particularly for shell companies offshore, is needed to fight money laundering and financial crime.
In 2018, UK parliamentarians effectively legislated for Cayman, when they inserted a clause into the UK Sanctions and Anti-Money Laundering Act. The clause demanded an order-in-council to implement such registers in the British Overseas Territories, if they did not introduce them voluntarily.
The move was strongly criticised as “colonial”, because financial matters are devolved to the territories and their own parliaments. UK parliamentarians, in turn, claimed their fight against money laundering was a matter of national security, overriding any devolved matters.
The issue strained relations between the UK and its territories.
However, the pressure on the British territories increased after the UK Crown Dependencies announced in June their commitment to public registers in line with developments in the EU, while Gibraltar expressed its intent to introduce a public register before the end of the year.
It is understood that the Cayman Islands government negotiated with other territories for months to come to a joint position. However, other territories argued that their constitutional relationship prevented them from making a commitment to public ownership registers at this time. The British Virgin Islands, for instance, has mounted an ongoing legal challenge to the beneficial ownership provision in the Sanctions and Anti-Money Laundering Act.
Premier Alden McLaughlin, who had previously stated Cayman would only make ownership information public if that were to become a global standard, said in a statement on Tuesday that the rules have evolved.
“The introduction of the UK’s public beneficial ownership register, the EU 5th Anti-Money Laundering Directive and similar actions by other jurisdictions represents a shift in the global standard and the practices used to combat illicit activity,” he said.
Cayman Finance stated in the same vein, “Now that the UK and EU are establishing an emerging global standard for ownership registers to be public, the Cayman Islands financial services industry will work closely with the Cayman Islands Government to ensure we meet that standard also.”
The association said the success of the industry had always been dependent on compliance with the highest global standards for transparency and cross-border cooperation with tax and law enforcement. As a result, Cayman achieves the same OECD rating for transparency as countries like the UK, the US, Germany, Canada and Australia.
Cayman Finance continues to maintain that Cayman’s non-public beneficial ownership system of service providers collecting and verifying beneficial ownership information is superior to the UK register of public, but largely unverified, information.
“Our industry has also actively supported Cayman’s verified ownership regime for more than 15 years even though verification of ownership information is not yet a standard achieved by most other jurisdictions, who still rely on less accurate registers of self-reported information,” the organisation stated.
“Now that the UK and EU are establishing an emerging global standard for ownership registers to be public, the Cayman Islands financial services industry will work closely with the Cayman Islands Government to ensure we meet that standard also.” – Cayman Finance
Naomi Hirst, senior campaigner at anti-corruption watchdog Global Witness, said in a press statement: “This commitment from the Cayman Islands to reveal the real people behind companies on their shores shows how company transparency is now the global standard in financial integrity. The writing is on the wall for the rest of the British Overseas Territories who will today be feeling the pressure to follow suit and announce their own plans as a matter of urgency.”
She said, once public registers are brought in across all the British Overseas Territories and Crown Dependencies, it will be much harder for the criminal and corrupt to use UK tax havens to hide and move stolen wealth.
The reform of the UK public register over the next two years and new European public registers, which are due to be implemented in 2020 under the EU’s 5th Anti-Money Laundering Directive, are likely to improve the standards of information accuracy and management.
Without its commitment to public registers, Cayman would have come under growing pressure from the EU. Although immediate plans are put on hold, the introduction of public registers is expected to become a future requirement to avoid inclusion on the EU tax blacklist of jurisdictions that are deemed uncooperative in tax matters.