Cayman Islands Financial Services

A delegation from the Cayman Islands took part in the Caribbean Tourism Summit in Washington DC that was held on June 22 – June 26, 2008.

The delegation was led by Minister of Tourism, Mr. Charles Clifford, and the Chief Officer of the Ministry of Tourism, Mrs. Gloria McField–Nixon, and included members of the Cayman Islands Ministry and Department of Tourism.

The summit t replaced the long standing annual Caribbean Week that took place in years past in New York.

The summit that brings together leaders from political, investment and tourism communities coincides with Caribbean American Heritage Month, which for the Caribbean creates a good platform to reach out to the diaspora.

Cayman will use a number of opportunities to demonstrate its talent and culture. For example, two famous cayman chefs, Chef Keith of Bacchus and Chef Shetty of Grand Cayman Beach Suites, will be responsible for a food preparation apprentice from the ministry.

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.

In the beginning of June, the government of the Cayman Islands elaborated on April’s budget address, in which Kurt Tibbetts announced measures to be taken during the 2008-2009 fiscal year with a view to further develop the reinsurance sector in Cayman.

The measures announced this year are based on recommendations that were submitted to Government on April 23, 2008 by the Reinsurance Task Force (RTF). Its recommendations aim at promoting commercial certainty for prospective reinsurance firms and developing progressive approaches to regulating reinsurance companies in Insurance Law.

According to the recommendations made by the RTF, reinsurance firms wishing to take advantage of Cayman should enter into a “social contract” with the government, which will reflect a partnership approach to joining the financial services community of the Cayman Islands.

Alden McLaughlin, Minister for International Financial Services Policy, the reinsurance business plays to natural strengths of the jurisdiction.

It has been announced by the Cayman government that the offshore country’s legislature will shortly debate new legislation that will be aimed at strengthening the jurisdiction’s anti-money laundering defences.

The bill to be debated is a fully revised version of the Proceeds of Criminal Conduct Law. According to Attorney General Samuel Bulgin, this revised version proposes to further modernise the anti-money laundering legislative and institutional frameworks in the Cayman Islands.

A civil forfeiture component will be introduced by the new anti-money laundering bill. This will allow for confiscation of proceeds. Evidence often shows that such proceeds flow from unlawful conduct, however there is no criminal conviction.

The above-mentioned bill is part of a legislative programme that includes scrutinising a Police Law and an anti-corruption bill, as well as legislation that regards the financial industry, the criminal justice system and many other laws.

Recently, the European Union has revised a list of countries that have satisfactory anti-money-laundering controls and made a decision to exclude the Cayman Islands from the “white list”.

The decision of the EU to leave tax havens off a “white list” of jurisdictions controlling money laundering in a satidfactory way has broken out a row the European Union and such offshore jurisdictions as the Cayman Islands, the British Virgin Islands Jersey, Guernsey, and the Isle of Man.

The Cayman Islands and the BVI have been excluded from the list, which means that they have been effectively blacklisted.

Guernsey, Jersey, and the Isle of Man have been placed on an “intermediate” list of financial centres which “may” meet compliance regulations. However, these jurisdictions claim that they have done their best to put to comply with anti-money laundering standards.

On June 1, 2007, amendments to the Money Laundering Regulations (2006 Revision) came into effect by virtue of the the Money Laundering (Amendment) Regulations 2007. The amendments come after an amendment to the Proceeds of Criminal Conduct Law (2005 Revision) on May 30, 2007, which extended the definition of “money laundering”, and after the Cayman Islands Monetary Authority (CIMA) published revised Guidance Notes in March 2007 on the Prevention and Detection of Money Laundering.

The main changes included into Amending Regulations deal mainly with the following:
- to incorporate the offences under the Terrorism Law into the definition of “money laundering”;
- to include knowledge or suspicion of terrorist financing into the procedures of identification and reporting;
- to introduce the concept of an “appropriate internal audit function” as an obligatory internal control procedure;
- to make it clear that liability for failure to obtain identification information from an eligible introducer remains with the person who provides the financial services in the Cayman Islands;
- to introduce extensive provisions on identification and record keeping for wire transfers.

The Amending Regulations have already come into force. However, there will be no prosecution for failing to comply with the identification and record keeping requirements that related to wire transfers until January 1, 2008. This gives payment service providers time for putting the appropriate procedures and technical mechanisms in place.

On May 23, 2008, Financial Secretary for the Cayman Islands, Kenneth Jefferson, brought the budget debate to a close in the House. He announced that the predicted USD 528.2 million revenue for the coming financial year is a 1% increase over the latest sum predicted for the fiscal year ending on June 30.

Jefferson explained that this rate is “even more conservative than the 1.7% real GDP growth forecast for the Cayman Islands for the 2008 calendar year, and the 1.4% real GDP growth forecast for calendar year 2009″.

The Financial Secretary noted that that the operating and interest expense for 2008/2009 is believed to total at USD 514.7 million. If to subtract this expense from forecast revenue, the resulting operating surplus for 2008/2009 accounts for USD 13.5 million.

To count the expected revenue for the coming year, the Portfolio of Finance and Economics considered data from the three institutions: Economics Statistics Office, Treasury Department, and the Department of Tourism.

In the current financial year, major revenue streams show that some USD 120 million, which is 23%, was derived from financial services, in the form of fees collected by the Cayman Islands Monetary Authority (CIMA) and the General Registry.