Cayman Islands Financial Services

As it has been discussed previously, the Cayman Islands Monetary Authority has recently shared its reflections on a difficult year 2008. It said that the year was difficult for the jurisdiction’s finance industry.

The jurisdiction continues suffering from with the fall-out from the US sub-prime crisis. CIMA’s Managing Director, Cindy Scotland said that CIMA has been monitoring the events unfolding in the USA as well as the repercussions happening across the globe. The Authority has been assessing the potential impact on the Cayman Islands. Also, a number of actions was announced in response to the current situation as well as in anticipation of further developments.

At a recent industry symposium, CIMA’s Managing Director said that Cayman is exposed to Bernard Madoff’s alleged USD 50 billion hedge fund fraud.

She said, “As part of an increased monitoring, we have required the seven retail banks to report additional financial details weekly (in addition to their usual quarterly reporting). To date the banks remain well capitalized and have been managing their liquidity. We have sought information from all banking licensees on their exposures to Washington Mutual, AIG, Lehman Brothers and Merrill Lynch – institutions which collapsed or had to be rescued in the latter part of last year. To date, we have had responses from 77% of the licensees. The sum of total reported exposures is relatively small.”

Scotland stated that CIMA sought information from all banking licensees on their exposures to the Madoff fraud and a few banks have reported some indirect exposure. However, this information is still coming in.

CIMA’s Managing Director announced that as of January 19, CIMA had been notified that 23 regulated funds had suspended redemptions, 90 regulated funds had suspended the net asset value (NAV) calculations and 2 regulated funds had suspended subscriptions. She added that the numbers are growing.

The Cayman Islands Monetary Authority (CIMA) has recently shared its reflections on a difficult year 2008. According to CIMA, the year was difficult for the jurisdiction’s finance industry that goes on suffering from with the fall-out from the US sub-prime crisis and that is also exposed to Bernard Madoff’s alleged USD 50 billion hedge fund fraud.

CIMA’s Managing Director, Cindy Scotland recently spoke at industry symposium. Despite the difficulties of the past year, she urged optimism. She warned that the pressure on the Cayman Islands and other offshore centres should be expected to increase. However, she believes that with a bit of innovation, Cayman can get even a stronger position than before the global crisis.

“The opportunity for Cayman is to use this time wisely (bearing in mind that time is not on our side) and position ourselves so that when the dust settles, this jurisdiction will remain a key player in the global financial markets but with new products and services,” Scotland observed. She continued:

Scotland also noted that it is time to diversify and develop relationships with other regions and said that CIMA intends to continue regular visits with other foreign regulators. In 2009, visits to China, Hong Kong and Singapore are planned.

As previously described, recently CIMA representative spoke at an Ernst and Young Symposium at the Ritz Carlton Hotel on Grand Cayman.

In her speech, Managing Director of the Cayman Islands Monetary Authority Cindy Scotland addressed changed regulatory policy on licensing banks. She said that the policy that was issued in October 2008 replaces the former Statement of Guidance on Licensing Banks as well as clarifies the criteria used by CIMA (http://cayman-islands-financial-services.offshore-journals.com/?p=16) to assess applications for the grant of licenses to conduct banking business in and from Cayman.

The following criteria apply to all categories of bank licenses:
- the fitness and propriety of the persons who will control and manage the bank;
- the bank’s ownership and control of the proposed licensee;
- the bank’s track record and business plan;
- the bank’s financial resources;
- the bank’s internal systems, controls and risk management;
- the bank’s know-your-customer policy; and
- the bank’s record-keeping.

According to Scotland, “The policy is in accordance with the Banks and Trust Companies Law and its regulations, as well as the Core Principles for Effective Banking Supervision (BCP’s) issued by the Basel Committee on Banking Supervision.”

To conclude her address, she stated that the Cayman Islands Monetary Authority continues to review its regulatory standards with respect to many factors contributing to the functioning of the financial industry.

Recently, Managing Director of the Cayman Islands Monetary Authority (CIMA), Cindy Scotland spoke at an Ernst and Young Symposium at the Ritz Carlton Hotel on Grand Cayman. In her speech, she outlined both recent and upcoming changes to the Cayman regulatory regime.

First of all, Scotland described the CIMA’s ethos and commitment to achieve the Cayman Islands being a well-regulated international financial centre. According to her, “CIMA’s philosophy on the regulation and supervision is that effectiveness is best achieved through a combination of rules-based and risk-based approaches. We seek to ensure that only businesses of the highest caliber become licensed or registered and that the framework governing financial services and how that framework is applied fit the level of risk of the types of businesses and the individual entities.”

She noted that extensive guidance is provided to regulated entities with a view to assist them in interpreting and meeting the requirements of the legislation and rules. Such guidance notes include the “Guidance Note on the Prevention and Detection of Money Laundering and Terrorist Financing in the Cayman Islands” that has recently been amended. Scotland said that the latest amendments were issued in September and December to provide specific guidance relating to wire transfers and to money services businesses.

The majority of the security firms have still not been licensed in accordance with the Private Security Services Law (2007) requiring that all privately-owned security companies and their employees are to be registered and to be regulated by the Royal Cayman Islands Police Service.

According to Cayman police, most security firms have at least begun the process of getting operating licences under the Private Security Services Law. This legislation became effective on September 1. Security firms and their employees operating in the Cayman Islands before September 1 have to become licensed under the new law until February 27.

A police spokesperson said that 15 security companies have completed licensing application forms and paid the necessary fees to achieve compliance. Another 15 firms have collected application forms but they have not been licensed yet.

On January 28, 2009, the Government of the Cayman Islands announced its intention to streamline work permits and immigration policies with teams dealing with the financial services and tourism industries. Also, the government will establish a 3rd group aimed to manage other sectors.

Leader of Government Business (LoGB), Hon Kurt Tibbetts announced that cabinet ministers will convene a forum for national economic consultation in order to gather general and business sector opinion. This will help offer opportunities to the private sector and to make the economy better and stronger in the future.

He also described steps to be taken by the Government to help ease a tightening economy. He said that policy initiatives should encourage business and investment.