Cayman Islands Financial Services

The Cayman Islands Monetary Authority (CIMA) has broadened its network of agreements with overseas regulatory bodies. In order to facilitate cross-border financial services supervision, it concluded information exchange agreement with the Office of the Insurance Commissioner (OIC) of Washington State, US.

The information exchange agreement has the form of a memorandum of understanding on information sharing between CIMA and the OIC. The document regulates insurance business in and from Washington State. It should be noted that the Office of the Insurance Commissioner is the primary regulator of all insurance entities domiciled in Washington state.

The above-mentioned regulators of the Cayman Islands and Washington State, US, have cooperated on information exchange since 2005.

The agreement came into force earlier this year, however it was announced by CIMA just recently. The information exchange agreement indicates the scope and procedures for both confidential and public information sharing that each regulator may need from the other jurisdiction for carrying out its supervisory responsibilities.

This agreement brings the number of agreements reached by the Cayman Islands Monetary Authority with overseas regulatory authorities to 11.

In addition to the memorandum of understanding with the OIC, there are cross-border agreements with the Jersey Financial Services Commission; the Bermuda Monetary Authority; the Isle of Man Financial Supervision Commission; the Office of the Superintendent of Financial Institutions, Canada; the Central Bank of Brazil; the US Commodity Futures Trading Commission and the Securities Exchange Commission; the Bank of Jamaica; the Superintendency of Banks of the Republic of Panama, and a multi-lateral memorandum of understanding with 8 Caribbean regulators.

When supporting the closure of a whistleblower website, Bank Julius Baer was protecting the confidentiality and interests of its Cayman account holders’, the bank said. The whistleblower website published documents related to the accounts.

So that the documents that alleged tax evasion by some of the Swiss bank’s clients got removed, the bank procured an injunction forcing the closure of Wikileaks.org, however this website is still accessible through its international domains.

It should be noted that a US court action regarding closing down Wikileaks.org has attracted world’s attention to Cayman offshore banking activities, which was just weeks before US Government Accountability Office (GAO) investigators visit government officials and local firms which has been mentioned previously.

The bank claims that a former vice president of the bank’s Cayman operation Rudolf Elmer was the one to post the documents on the website. According to Charles Farrington, managing director of Julius Baer Trust in Cayman, in 2005 the bank became aware of the data that had been stolen from the bank around 2002. Farrington said that the bank informed its clients and kept them apprised of the efforts to recover the stolen data.

Eduardo Silva, chairman of the Cayman Islands Financial Services Association (CIFSA), said the following: “We are aware that the role of the Cayman Islands is sometimes misconstrued in circumstances where there is suspicion of abuse, but we are confident that our regulatory framework meets the highest international standards and that our reputation continues to improve in this regard as the information about our standards are communicated overseas”.

A lawyer employed by Maples and Calder, the largest law firm in the Cayman Islands, which advises on the laws of the Cayman Islands, the British Virgin Islands and Ireland, has been regarded as one of the major players in the Gulf in a respected legal magazine in the Middle East.

Managing partner of Maples and Calder’s Dubai office, Tahir Jawed, was in the list of 20 lawyers featured by The Brief – a magazine that specialises in the legal aspects in the Middle East. The fact that a lawyer practising Cayman law in Dubai has been recognised signifies the significant role Cayman is playing in the Middle East market.

Jawed said that the recognition of a Dubai-based lawyer practising Cayman law as a prominent member of the legal community of the Middle East reflects both the Cayman Islands and Maples and Calder’s’ commitment in the region. According to Jawed, “Given the economic growth taking place in the Middle East, the growth in Islamic finance and the opportunities such a market presents for offshore jurisdictions, the Middle East will become increasingly important to offshore jurisdictions and it is important that we position ourselves to take advantage of the opportunities.”

In 2005, Maples and Calder was the 1st Cayman firm to open an office in Dubai, and Jawed became the 1st offshore lawyer to serve the firm’d growing client base in the Middle East. It is worth mentioning that The International Financial Law Review awarded the firm’s Dubai office as the Middle East mergers and acquisitions deal of the year. Also, Maples and Calder’ has received 7 awards from Islamic Finance News.

One of the main challenges that the Cayman Islands Financial Services Association (CIFSA) faces is how to relay the integrity of the Cayman Islands’ financial services internationally while raising awareness of the industry’s importance to Cayman locally.

CIFSA chairman Eduardo Silva said that the Association is starting to work on achieving the objective which is communicating the quality and integrity of Cayman financial services industry. According to him, one of CIFSA’s challenges and priorities for 2008 is creating a strong awareness of the importance of the financial services industry in in the jurisdiction.

The CIFSA has been welcoming individuals to business luncheons in order to introduce them to the jurisdiction’s financial services. The luncheons are aimed to bring down to Cayman the people, so they can see how the industry operates in Cayman. Silva added that the next event of the Association was planned for April.

A relaunch of the website is also underway.

Silva said that “the primary mission of CIFSA and the reason for which it was formed is to communicate the integrity and quality of the Cayman Islands’ financial services industry both internationally and domestically”.

In March, the United States Government Accountability Office (GAO) is coming to the Cayman Islands in order to talk to government officials and offshore firms because it looks into US companies registered in the jurisdiction. Silva welcomed this visit as the guests will find out that Cayman meets high regulatory standards.

Two new managers have been appointed by Deutsche Bank in the Cayman Islands as the bank continues goes on strengthening and expanding its Financial Intermediaries team. The position of a business manager has been taken by Dan Peterson and Billy King will become a relationship manager at Deutsche Bank.

Mr. Peterson will provide senior level strategic support to the FIM team of Deutsche Bank and assistance to the relationship management team in providing appropriate solutions for clients. Peterson has broad experience and expertise in business development and wide knowledge in trust and company management, fund administration, the captive insurance, credit analysis and corporate banking sectors. Mr. Peterson joins Deutsche Bank from the Royal Bank of Canada in Miami.

The new role of Billy King within Deutsche Bank’s FIM team will be closely working with the expanding intermediary client base. He is experienced in the offshore banking sector, particularly in business development, as well as in managing portfolios for high net worth individuals – captive insurance, strategic advice, foreign exchange transactions and mortgage portfolios. Mr. King joins the bank from the Lucas Group in Chicago.

Janet Hislop, Head of the Financial Intermediaries team at Deutsche Bank Cayman, said that the bank is committed to building high quality financial services offered from Cayman and is going to continue growing operation throughout this year as it Deutsche Bank celebrating its 25th anniversary of being in the Cayman Islands.

Mourant du Feu & Jeune, part of Mourant and one of the world’s leading offshore law firms that offers Cayman, Jersey and Guernsey legal advice from offices in the Cayman Islands, Jersey, Guernsey, London and New York, has hired 2 partners – Richard de Basto and Matthew Feargrieve – for its Cayman Funds and Finance practice groups.

Richard de Basto was a partner of Allen & Overy for about 8 years and was working in offices in London, Amsterdam and Hong Kong. He is an experienced specialist in the field of asset, construction and project finance who advises clients on major and complex finance transactions. In the Cayman Islands, he will further advance Cayman Finance practice of Mourant du Feu & Jeune.

Matthew Feargrieve comes from Maples and Calder. He was a senior associate of Maples and Calder in London and advised on Cayman and BVI investment fund structures for hedge and private equity funds. Mourant du Feu & Jeune announced that from its London base, he will advise on Cayman law and the Cayman Funds practice.

The CEO of Mourant du Feu & Jeune, Stephen Ball, welcomed both specialists to Mourant as they joined to build on the capabilities and strengths of the firm’s expanded practice in the Cayman Islands, following its merger with Cayman firm Quin & Hampson in 2007.

The Cayman Islands Financial Services Association (CIFSA) has recently suggested that although Cayman’s service providers and the Regulatory Authority takes many efforts to fight money laundering, certain international financial centres fail to recognise the anti-money laundering regime of the Cayman Islands.

As the body promoting Cayman as a quality international financial services centre, CIFSA meant a recent article in the Cayman Observer newspaper. The article reported that efforts to gain a competitive edge in such jurisdictions as Dubai, Bermuda and Dublin have resulted in difficulties that attracted outsourced funds business from Cayman.

According to CIFSA, without the recognition of the jurisdiction’s anti-money laundering regime, service providers have to complete additional due diligence routine providing an extra regulatory hurdle, while administrators in cayman are outsourcing administrative work to counterparts in other jurisdictions.

Eduardo Silva, chairman of CIFSA, observed that this situation is hard to understand as Cayman’s anti-money laundering framework is among the strongest in the world and it is even more robust than in many onshore territories. Silva said that when the regulations were introduced internationally “they were universally to be applied retroactively”. He added that “Unlike the US and the UK, who considered the exercise not to be too costly, the Cayman Islands complied and undertook the ‘know your customer’ exercise throughout the industry at considerable expense to the service providers”.

CIFSA suggests that jurisdictions which have recognised Cayman’s anti-money laundering framework as equivalent to their own (for example, Jersey) have seen business grow between the 2 countries, which will further increase as Cayman’s market takes a leading position in the hedge funds sector.

Jersey’s recognition of Cayman Islands’ regime means that it considers Cayman’s framework to be equivalent to its own and the other countries on its list. The list includes Gibraltar, Guernsey, the Isle of Man, Singapore, Japan, the US, and all the major developed European nations.

Previously, it was discussed that CIMA released the quarterly report revealing that the jurisdiction remains at the head of the offshore funds world and maintains its position as the 2nd-largest offshore insurance domicile.

However, the report paid attention also to discussing legislative developments during the quarter under review. These included an amendment to the Monetary Authority Law (MAL) that was passed by the Legislative Assembly on December 13 2007.

The Monetary Authority Law (MAL) clarifies and extends the Authority’s powers to disclose information to other regulatory authorities responding to requests for assistance from the authorities.

The report specifically discussed the amendment to section 50 of the MAL as it removes the distinction between routine and non-routine requests, and the corresponding referrals to the Attorney General and the Financial Secretary.

It also allows CIMA to agree to the use of information provided pursuant to a regulatory request for assistance in certain criminal proceedings or investigations. Previously, the law did not enable CIMA to consent to the use of information it provided to overseas regulators without the consent of the Financial Secretary and the Attorney General.

The decision to make amendments as regards section 50 was the result of ongoing discussions between CIMA and the International Organization of Securities Commissions (IOSCO) on the Cayman Islands’ provision for cooperation with international regulators.