Cayman Islands Financial Services

Cable & Wireless (C&W) intends to launch a new Internet-based telephony service for businesses communication to ensre cost savings and greater mobility for their customers.

The new service called “Virtual Office” enables users to make phone calls through their computer as well as managers to administer call handling through software as alternative to a private branch exchange (PBX).

According to C&W, by removing the need for a PBX, the service will cut telecoms costs and respond to the growing trend for the users of mobile business who no longer want to be tied to physical desk or office.

However, the precise savings is not known yet as the Information and Communication Technology Authority (ICTA) has not approved C&W’s tariffs yet. So, Virtual Office is subject to ICTA approval. C&W would like to launch the new service by late June.

C&W does sell and rent PBXs, however, it does not see the launch of Virtual Office as a big conflict with its existing offerings.

Business class voicemail, call forwarding, call waiting and do not disturb will be the options enabled by the Virtual Office service. Also, a variety of other communication tools such as telephone conferencing, easy access to video calling, account and authorisation codes, and web based interfaces for phone set-up including moves, adds or changes will be available.

As far as lawmakers have concerns the country’s spending on legal aid, Chief Justice Anthony Smellie has made a promise to review the system providing attorneys for poor defendants. Mr. Smellie is going to look at the whole question of legal aid spending from all the perspectives.

The courts staff will complete the review and its results will be processed to the Law Reform Commission, which, in its turn, will make recommendations on what should be changed. Approximately 2-3 months is a period expected to be spent for the court review.

The concerns began when several Members of the Legislative Assembly inquired why the costs spent to provide lawyers in criminal and civil cases haveincreased more than twice this decade in Cayman Islands.

In accordance with figures Mr. Smellie provided, within the past 10 years, legal aid costs have actually tripled. Cayman’s budget for legal aid was $556 818 In 1999, while this year it is expected to be about $1.8 million, including supplemental spending. However, Mr. Smellie said that the number of criminal charges coming before the courts during the same period has risen 77%. Cayman Islands courts had 4 929 criminal charges In 1999, while last year they saw 8 729 charges.

According to Chief Justice, more than 90% of all defendants in criminal charges qualify for legal aid as many either come from poor backgrounds or have been imprisoned before and had no job afterwards.

Financial services provider Close Brothers (Cayman) is going to acquire representative banking, agency and fund administration businesses of Scotiabank.

According to a joint statement, final preparations were being undertaken to ensure a smooth transfer of the business lines by both Close and Scotiabank.

This acquisition is not related to Scotiabank’s retail banking operation and it follows Close’s acquisition of Dresdner Bank’s Cayman-based trust and corporate business in 2005.

Linburgh Martin, Close’s managing director said that this second acquisition within the last 2 years is a significant step for the company, which has grown rapidly in recent years. Martin said that “the acquisition from Scotiabank is a business-transforming deal that fills out certain existing business lines” and it makes Close Brothers the market leader in the bank representation business, which is new for the company.

The transfer of business happened in conjunction with a successful application to the Cayman Islands Monetary Authority (CIMA) by Close Bank (Cayman) to upgrade its Category ‘B’ banking licence to a Category ‘A” licence.

Having granted the licence, CIMA will allow Close to support Scotiabank’s existing representative banking business.

Alana Julie, director of Close Bank (Cayman), said that Close Brothers remains focused on business development to meet the needs of customers and community and that a Category ‘A’ licence demonstrates the company’s further commitment to the Cayman business community and market place.

The Cayman Islands Investment Bureau (CIIB) and the Cayman Islands Development Bank (CIDB) – 2 governmental agencies providing assistance to entrepreneurs and small business owners are planning to work more closely together.

The CIIB is an agency offering help and advice to business owners. The CIDB is a government institution providing business loans, mortgages and other financial products to those who may not be able to secure financing elsewhere. Both agencies are going to integrate the services offered to their users and customers.

The partnership builds on existing links between the CIIB and the CIDB. In accordance with both agencies, integrating their services more would allow Cayman businesses to get off the ground quicker or expand further into new areas. The staff of the CIIB have had training sessions with the CIDB in order to learn more about the support and financial services offered by the institution to small businesses.

Also, the CIIB intends to assist the customers of the CIDB in building the business plans and proposals to secure funding from the bank.

According to Dr Dax Basdeo, the Executive Director of the CIIB, local small business owners and entrepreneurs have become more sophisticated than previously, and that many go on applying for funds from the CIDB without having even a simple business plan at their disposal.

He also pointed to a group of local business people offering mentoring and early-stage financing to small businesses, which is called the CIIB-affiliated Angel Investor Network.

Ralph Lewis, the general manager of the CIDB, suggested that the partnership with the Cayman Islands Investment Bureau would be beneficial for the bank’s appraisal and analysis process, and the CIDB will be able to respond to applications more efficiently.

Last week the regional workshop on e-government readiness took place in Grand Cayman to recognise a set of demands imposed on governments in a rapidly changing world. The workshop was arranged by the Cayman Islands Cabinet Office and supported by the Commonwealth Secretariat and the Cayman Islands Portfolio of the Civil Service.

At the opening ceremony at the Marriott Beach Resort, Financial Secretary the Hon. Kenneth Jefferson, JP, told delegates about these new and different demands.

He also added that technological developments are moving forward and the masses access the information via the Internet, therefore the information and service are wanted to be available and quick. This is logical to be demanded because of the development of technologies. According to Mr. Jefferson, the governments must “embrace information technology and explore its various areas of usefulness, in order to better serve the people”.

The 4-day workshop brought together people from all around the Caribbean and from Eastern Africa in order to share experience in using information and communication technology for enhancing public service delivery.

Keynote speaker, University College of the Cayman Islands President Dr Hassan Syed putt the value of e-government structures into perspective, saying that e-government is empowered to move the civil service from a bureaucracy to an efficient service provider, which will reduce costs for government and ease the burden on citizens.

Two reports examining and addressing key issues for such offshore financial centres as Cayman were released in May.

The Centre for Freedom and Prosperity Foundation (CF&P Foundation) released a study by Daniel Mitchell that discusses the misconceptions and inaccurate information that “wraps up” low-tax jurisdictions. This study called “Tax Havens: Myth versus Reality” examines 10 key “myths”. The president of the CF&P Foundation, Andrew Quinlan considers this study to be a tutorial for policy makers eager to learn the truth about “tax havens”.

According to the director of the Cayman Islands Financial Services Association (CIFSA) Eric Crutchley, such studies help “to highlight the role that low-tax jurisdictions play in the global economy and help remove some of the mistruths and stereotypes of offshore financial centres that are still being fostered in novels and movies”.

Another report was a study carried out by Camille Stoll-Davey of Oxford University for the International Trade and Investment Organisation (ITIO) and published by the Commonwealth Secretariat. Its title is “Assessing the Playing Field – International Cooperation in Tax Information Exchange”. This report is based on an analysis of objective data compiled by the Organisation for Economic Cooperation and Development (OECD).

According to CIFSA director Eduardo D’Angelo Silva, the above-mentioned report indicated the common failure of large countries to adhere to the same tax standards that they themselves require from offshore financial centres.

Silva said that offshore financial centres such as the Cayman Islands “often lead the way in their compliance with regulations set by such bodies as the OECD and FATF however their involvement in the creation of such standards is limited”.

The Cayman Islands government and senior specialists in the Cayman financial services sector have recently criticised the Washington Post that published an article about Cayman and tax cheats. According to the article, the Cayman Islands was the world’s leading jurisdiction in providing a tax haven to US cheats.

Of course, international newspaper articles that suggest Cayman harbours tax criminals and money launderers are not new. However, the Washington Post is considered to be one of the most influential and respected publications in the world, and its article written for the Post by Tom Cardomone, managing director of the Global Financial Integrity Program at the Centre for International Policy (CIP), and named “You paid your taxes? Sucker” caused an very strong official response from the Cayman officials and executives.

The article criticised by the Cayman Islands government contained significant inaccuracies, which persuaded to write a complaint to the editor of the Washington Post, Leonard Downie Jr.

As far as the author of the disputed article is managing director of the Global Financial Integrity Program at the CIP, evidence of illegal financial flows is likely to come from this centre.

First of all, Cardomone made a point that the value of financial assets placed by US individuals and corporations in offshore financial centres like the Cayman Islands, the Channel Islands, the Bahamas and Switzerland had grown substantially between December 2003 and December 2006.

Also, it was claimed in the article that the largest increase came in Cayman, where, in accordance with the article, the value of US-owned financial assets had grown by 2/3 in the 3-year period, jumping from USD 490 billion at the end of 2003 to USD 822 billion at the end 2006. According to the article, the Bahamas, Ireland, Switzerland and other jurisdictions enjoyed similar growth rates, however, they had smaller values in comparison (USD 193 billion, USD 112 billion and USD 63 billion at the end of 2006, respectively).

According to the article, companies could be easily established in offshore centres via the Internet “with just a few clicks of a mouse”.

In response to the Washington Post article, 2 letters were sent from the Cayman Islands – one from the Cabinet minister responsible for the government’s financial services policy, Alden McLaughlin, and the other from the Cayman Islands Financial Services Association (CIFSA).

Both letters stated that the strong growth of Cayman as a financial centre was based not on tax crimes, but on legitimate business.

McLaughlin said that no protection was offered for Americans who commit tax crimes by the Cayman’s law enforcement, regulatory and tax system. He said that company formation in Cayman was a regulated activity, which requires due diligence.

The letter sent from CIFSA was co-signed by the association’s board of directors. It stressed that although “secrecy laws” did not exist in Cayman, many laws regarded punishing tax crimes.