Cayman Islands Financial Services

Taxation in 2010 Budget has been only nominally increased by the Cayman Islands. This move reveals the Cayman government’s 3-year plan aimed to bring its budget back to surplus. Besides cuts in expenditure, the government of the jurisdiction has proposed many reforms designed to enhance the jurisdiction’s attractiveness to investors.

When delivering the budget, Cayman’s Premier McKeeva Bush said: “Given the observations of the current fiscal year, it is evident that the economy is at a point where additional taxation will compromise the competitiveness of businesses. Such an outcome would have implications for the economy’s capacity to grow its way out of the recession. There is an awful tendency here to say raise taxes and let business pay, but the harsh reality is that if that is the case, we will run away businesses, and lose more jobs. The only ones to really suffer are Caymanians, particularly those who can’t help themselves. Therefore one of the key tenets upon which government policy would revolve, during the fiscal year 2010/11, is the minimization of any new revenue measures on businesses, especially when it becomes a burden”.

According to the government’s budget forecasts, a small surplus of about USD 11.1 million is expected in the fiscal year 2011-2012. In 2012-2013, a fiscal recovery is foreseen as the surplus is expected to be essential.

To improve the attractiveness of the Cayman Islands to outside investors, the following measures are to be implemented by the government:

- to further modernize and enhance regulation and supervision in order to ensure that the jurisdiction keeps on par with the evolving international regulatory standards and best practices relevant to its various types of business;

- to intensify international cooperation and involvement in order to ensure that the government does its part to ensure the safety and sound regulation of the international financial system, allowing the islands to contribute to the development of international rules and standards that affect it;

- to increase the effectiveness and cost-efficiency with which regulatory agencies operate;

- to facilitate the efforts of government and the private sector to further develop the jurisdiction as an international financial centre;

- to become more business-friendly.

When speaking at a recent conference, Anthony Travers, Cayman Finance Chairman, called for the further relaxation of the highly restrictive immigration and rollover policies of the jurisdiction with a view to encourage professionals to the Cayman Islands and to maximise its offering as a leading international financial centre in light of recent fee hikes.

Tracers recalled that in October 2009 higher fees, including for work permits, were introduced. He noted that the regime is unsustainable and emphasized that it would lead to more competitive offshore jurisdictions taking business from Cayman. As the government is increasingly seeking greater revenues from fewer transactions, he suggested that the jurisdiction’s offering should be of a higher standard. For instance, Travers urged the government to introduce additional reforms in order to provide prospective investors with the chance to set up physical operations in the Cayman Islands that would allow them to further maximise the benefits of investing in the jurisdiction with its low tax regime.

In the conclusion, Travers said that while the Cayman Islands has been in compliance with international standards on transparency and tax information, new scrutiny surrounding the lack of physical operations in the jurisdictions could be the next hurdle for it. By means of encouraging foreign companies to set up operations in Cayman, the jurisdiction could further show its compliance with the changing requirements being placed on offshore territories.

On April 28, 2010, the Immigration (Amendment) Bill 2010 was passed by the Cayman Islands parliament. The new legislation allows 25-year residence to rich individuals who invest in businesses contributing to the prosperity of the jurisdiction, on certain conditions.

The Bill gives the possibility fot foreign individuals to apply for a Residential Certificate for Investment. This will cost KYD 20 000 (USD 24 000), and allows the investor, their spouse and any dependents the right to live in the Cayman Islands without a work permit on certain conditions.

Under the newly-introduced law, investors must:
- have a net worth of at least KYD 6 million;
- invest at least KYD 2.4 million in licensed businesses with workforces comprising of at least 50% Caymanians, contributing to the prosperity of the jurisdiction;
- pass checks on business competence, show financial records of their businesses’ stability, and show that they undertake a managerial role in their given area;
- possess a clean criminal record;
- be of sound health with adequate health insurance.

It should be noted that the Immigration Law previously contained provisions to allow residence to wealthy investors but were retracted as the Cayman Islands received little interest.

Cayman-based offshore legal and fiduciary services firm Ogier Partners organized the 2nd Annual Ogier Global Investment Funds seminar series entitled “The Evolution of Offshore Investment Funds”, devoted to the analysis of the past, present and future of offshore investment funds.

The seminar of the Cayman firm was led by partners Peter Cockhill, James Bergstrom, Colin MacKay and Simon Schilde. During the seminar, the following issues were discussed: proposed structuring and language clarifications, current litigous climate and the issues surrounding claims against funds and their service providers, and various international regulatory initiatives, with an analytical focus on possible outcomes.

The conclusion of the seminar was that, as a result of tax regulatory initiatives being developed by different countries and organizations, including the G-20, OECD, US, EU and UK, the investment managers will need to establish additional management and administration operations in the jurisdictions of their investors and/or move offshore. “Transparency is the new paradigm,” according to James Bergstrom; he said that “In the near future only those offshore financial centres (‘OFCs’) which meet the regulatory and tax transparency requirements of the new Financial Stability Board will be permitted to participate in the international financial system.”

The Ogier seminars traced the origins of the current international initiatives back to 1996 when the OECD’s harmful tax practices project was launched, and defined the key criteria that will need to be met by OFCs and the offshore funds domiciled within them.

Ogier group has presence in eleven jurisdictions around the world, namely Bahrain, British Virgin Islands, Cayman Islands, Guernsey, Hong Kong, Ireland, Jersey, London and Tokyo. Through a global network of offices, it provides advice on all aspects of BVI, Cayman, Guernsey and Jersey law and associated fiduciary services.

Earlier, the Cayman Government proposed to re-develop the George Town port with a view to separate cruise and cargo facilities and install cruise berths. However, the community had mixed feelings about that. Nevertheless, the government is pressing ahead with the project.

On January 8, 2009, the government announced that the 1st phase of public consultation regarding the Environmental Impact Assessment will start next week. The government said that the recommendations on financial modeling options for a public-private partnership will also be ready shortly.

The Leader of Government Business Kurt Tibbetts said that plans with the port project and that environmental assessment were moving ahead. According to him, estimates for the cruise project range from USD 109 to USD 117 million which depends on the design option, and a further USD 71 million for the port facility.

However, the project will not be financed entirely by government. The financial modeling options for the project are being devised by KPMG. Also, in July 2008, the Cayman government entered into an Memorandum of Understanding with investors Atlantic Star that may become the full or limited partner in the port’s development.

At the annual Cayman Captive Forum in the beginning of December, the Leader of Government Business in Cayman, Kurt Tibbetts, told delegates that the Cayman Islands’ offshore finance industry holds a strong position despite the global financial turmoil. He also said that the government continues to be committed to growth in the captive insurance sector.

The annual conference was held on December 2-4. Tibbetts said that this year’s conference was particularly significant taking into consideration global events.

Tibbetts said, “We see as our duty to uphold what a recent US Government Accountability Office report on the Cayman Islands described as a ‘…reputation for stability and compliance with international standards, business friendly regulatory environment and prominence as an international financial centre.” He noted the commitment to ensuring that Cayman’s captive insurance industry remains successful. According to Tibbetts, the Cayman Islands has more than 770 captives domiciled writing USD 7.6 billion of premiums and with over USD 35 billion of assets under management.

At to the government’s fiscal policy, it is designed to keep the Cayman Islands “business-friendly and economically stable”, despite the stresses exerted by the state of the global economy.

Richard Dodd, the Chief Executive Officer of Cable & Wireless in the Caribbean, has recently announced that the company with principal operations in the Channel Islands, the Caribbean, Panama, Macau, and Monaco plans to invest more than USD 400 million in Caribbean telecommunications development over the next 3 years.

The announcement followed positive company results published in May 2008. The results revealed that revenues for Cable & Wireless International had increased by 6% year on year to GBP 1.2 billion.

According to Dodd, Cable & Wireless is repositioning itself for an era of competition, it “intends to be around long into the future to bring the customers the superior brand of telecommunications products and services that has helped to put the Caribbean ahead of many countries in telecommunications infrastructure”.

The Cayman Islands Financial Services Association (CIFSA) has responded to a recent report by the Public Accounts Committee (PAC) of the United Kingdom’s House of Commons. It has sought corrections regarding a “misrepresentation” of the standards of regulation within the UK’s Overseas Territories that was mentionedf in a statement of the report.

According to the PAC report, the financial regulation standards in most of the Territories were not as good as the standards that exist in the UK Crown Dependencies such as Jersey and the Isle of Man.

To respond to the statements, Eduardo Silva, Chairman of CIFSA, compared the 2 groups of UK Territories.

He said that, in general, CIFSA welcomes discussing offshore centres as it improves the level of information on the important role of such offshore jurisdictions as the Cayman Islands. However, he commented that on occasions like this it is equally important to correct any misrepresentations, “particularly those may impact international perceptions of the standards of regulation in the Cayman Islands”.

Chairman of CIFSA indicated that Jersey officially recognises anti-money laundering (AML) practices of the Cayman Islands as equivalent to its own, which means that the Jersey Financial Services Commission’s (JFSC) AML/CFT requirements are satisfied if a customer has met customer identification procedures in Cayman. The JFSC has said that Jersey’s financial institutions can rely on the “know-your customer” and “due diligence” procedures of the institutions in the Cayman Islands as being as robust as the laws that must be observed in Jersey.

Chairman of CIFSA also stated that, according to the most recent CFATF report, the Cayman Islands financial services industry has a strong anti-money laundering and counter terrorist financing compliance culture.

A bid is being completed by project managers to establish a local professional chapter in the Cayman Islands. The chapter is expected to make Cayman attractive for investors and businesses.

Project management, which suggests planning and managing resources to achieve a plan, has become a recognised profession since the US-based Project Management Institute (PMI) that has 260 000 members and 251 chapters worldwide was established about 40 years ago.

President of the Cayman Islands Project Management Association, Patrick Cimolini, and a group of project managers are applying for establishing the Cayman chapter of PMI. They hope that it will be set up by the middle of 2008.

According to Cimolini, it might offer people more confidence in investing in Cayman and doing business there. The Cayman Islands already can boast of good professionalism in the legal, accounting and engineering areas, and project management will add up to an image of professionalism of Cayman.

It should be noted that Cayman’s project managers are now on the 3rd step of a 5-step process to become chartered.

Currently, the venture-capitalist group that works with the Cayman Islands Investment Bureau, the Cayman Angel Investor Network (CAIN), has approved just one business proposal seeking investment.

The 12-member group was founded 2 years ago in order to aid Caymanian entrepreneurs. The group represents various sectors and provides an alternative source of funding to entrepreneurial ventures that operating in Cayman.

CAIN has reviewed many proposals, however, most of them have lacked the qualifications required by CAIN.

According to CAIN chairman Winston Connolly, the Cayman Angel Investor Network expects to see more proposals using technology like the Internet or taking advantage of Cayman’s tax-free status, or expanding on such services as independent directorships and corporate administration.