Cayman Islands Financial Services

It has recently emerged that the Cayman Islands Monetary Authority (CIMA) was part of the Caribbean Financial Action Task Force (CFATF) team that in February 2008 evaluated the anti-money laundering and counter-terrorist financing regime of the British Virgin Islands (BVI).

In accordance with the annual report for 2007 published by CIMA, Legal Counsel, Sandra Edun-Watler was a legal examiner in the delegation that conducted the 3rd Round Mutual Evaluation in the BVI . The delegation consisted of law enforcement, financial and legal examiners. The team of examiners included officials from Barbados, the Netherlands and Trinidad & Tobago. It ndertook the on-site inspection from February 10-23.

In the evaluation process, Mrs Edun-Watler was reviewing legal systems of the BVI. The issues under review were criminal offence of money laundering and terrorist financing, confiscation and seizing of proceeds of money laundering and terrorist financing, and international cooperation, that included extradition and mutual legal assistance.

It should be reminded that Cayman underwent this process, under the CFATF initiative, in November 2008 in its 3rd Round Mutual Evaluation. Once every 3 years each jurisdiction that is one of the 30 CFATF members undergoes a peer review through the examination.

Mrs Edun-Watler commented that being involved in the examination process had given her a clearer insight into what the CFATF is looking for.

The Cayman Islands Monetary Authority (CIMA) has made an announcement that it is going to launch its Investments Statistical Digest, which is the Cayman Islands’ first comprehensive compilation of data on hedge funds.

CIMA announced that the report on the hedge fund industry will include aggregate statistical information that will underline that Cayman is the jurisdiction to choose for hedge-fund domiciliation and that it is the Cayman Islands of a world-wide network of hedge fund activity. Some of the topics to be covered in the publication will be fund structure, investment strategy, asset allocation and investment management. The report will be available both in print and electronically.

According to Head of Investments of the Investments & Securities Division (ISD), Yolanda McCoy, CIMA is sure that the Investments Statistical Digest will be a crucial source of information on the nature, scope and performance of the hedge fund industry in the Cayman Islands as well as the nature and performance of the global market. She also suggested that the report will promote greater transparency.

It should be noted that the Digest is based on the data submitted by CIMA-regulated funds with December 31, 2006 financial year end. This was the first group of funds that submitted annual returns to CIMA via the Authority’s electronic reporting system introduced in March 2007.

Recently, the Cayman Islands Government and the Turks and Caicos Islands Government have signed an agreement. According to the agreement, the Cayman Islands Lands and Survey Department will develop and implement a Land Registry system that will be fully computerised. This will be a related GIS (Geographical Information Systems) developed by the Cayman Government for the Turks and Caicos Islands Government. The development of the Registry includes also the creation of an interactive website.

The formal signing of the agreement was held in Providenciales on May 12, 2008.

The Cayman Islands were represented by Kearney Gomez, Permanent Secretary for the Ministry of District Administration, Planning, Agriculture and Housing; and Alan Jones, Director of the Lands and Survey Department. The Governor Richard Tauwhare and McAllister Eugene Hanchell, Minister for Natural Resources, Fisheries & the Environment signed the agreement on behalf of the Turks & Caicos Islands. Judith Garland-Campbell, Permanent Secretary for the Ministry of Natural Resources Fisheries & the Environment; Kendall Williams, Registrar of Lands; Grisilda Smith Deputy-Registrar (Turks & Caicos) and Aliceann Kirchman, Registrar of Lands (Cayman Islands) were also present at the meeting.

Discussions on improving Land Registry system between the 2 countries have been ongoing since March 2007. Cayman officials offered technical and practical assistance to Turks & Caicos, so, a long term cooperative agreement was signed between the jurisdictions.

On May 5, 2008, the Cayman government announced the approving of additional spending of USD 5.5 million for the current 2007-2008 budget.

The additional USD 5.5 million will be obtained from two sources – partly from savings in expenses achieved by Cayman government entities and partly from increased funding.

According to Financial Secretary Kenneth Jefferson, as a result of the supplementary budget, the reduced net surplus on June 30, 2008 is now expected to be USD 20.8 million, which is down from the figure of USD 37.7 million expected in November last year.

Financial Secretary said that total operating revenue is expected to decline from USD 530.7 million to USD 523.3 million – so it could decline by some USD 7 million. As regards total operating expenses, they are projected to be up to USD 489.3 million, from the total of USD 476.6 million predicted in November 2007.

Funds licensed in Cayman have become subject to 3 new rules that were issued by the Cayman Islands Monetary Authority (CIMA) in order to further enhance the retail funds sector regulation.

Approved by the government, the new regulation became effective on April 28. The three rules are as follows: the Rule on the Contents of Offering Documents, the Rule on the Calculation of Asset Values, and the Rule on the Segregation of Assets for Licensed Funds.

The Rule on the Contents of Offering Documents outlines the information that is to be included in offering documents.

According to the Rule on the Calculation of Asset Values, funds are required to specify their policy in order to calculate the funds asset values.

The Rule on the Segregation of Assets for Licensed Funds calls for a portfolio of a fund to be segregated and accounted for separately from the assets of a service provider.

The above-mentioned rules aim at ensuring that prospective retail investors will be able to make informed investment decisions, and enhancing the overall protection of investors in the licensed funds and their assets.

It should be noted that the rules formalise what has been common practice among the funds licensed in the Cayman Islands. Cayman codified these practices in line with the standard issued by the International Organization of Securities Commissions (IOSCO) entitled the Objectives and Principles of Securities Regulation.

The Cayman Islands Tourism Association (CITA) will submit to the Ministry of Tourism formal recommendations on possible exemptions to the rollover policy.

According to CITA Executive Director Trina Christian, there was the association’s annual general meeting (AGM) on April 24. The participants were preparing the recommendations that are to be ready for the submission in May.

CITA Executive Director Christian said that the matter had been brought up by CITA to the Minister of Tourism, Hon Charles Clifford, at their last regular meeting on April 18. One of the issues discussed was the exemptions allowed in other offshore jurisdictions upon which the rollover policy of the Cayman Islands was modelled.

Ms Christian mentioned an online survey concerning rollover that was recently conducted on the CITA website. As regards figures posted on April 23, preliminary results reveal that a majority of respondents strongly agree that recruiting has become more difficult since the rollover was introduced and that the rollover has had a negative effect on business.

The full results of the survey will be released by CITA shortly.

In the middle of April, the Cayman Islands Monetary Authority (CIMA) announced that it has appointed Mrs Tricia Thompson, its former Chief Analyst, Banking, as its Deputy Head of Banking Supervision. It has also appointed Melanie McLaughlin, former private sector litigation attorney, to the new post of Freedom of Information Manager/ Legal Counsel.

According to the Authority, as Deputy Head of Banking, Mrs Thompson will provide leadership support in all areas of the Banking Supervision’s work. Her responsibilities will include overseeing the licensing application process for banks, money services providers and credit unions, as well as coordinating the onsite inspection programme and doing other activities related to licensee monitoring.

Mrs Thompson will also be dealing with regulatory development initiatives for the Cayman banking sector.

As regards Ms McLaughlin’s appointment as Freedom of Information Manager/Legal Counsel, CIMA has begun to prepare for implementing the Freedom of Information (FOI) Law that in January 2009 is to come into force across the Cayman Islands Public Service. Ms McLaughlin will be involved in developing and implementing procedures and systems that will be used by the Authority in order to handle applications to access to information under the FOI initiative and the National Archive and Public Records Law.