Archive for August, 2010

Cayman Finance published open letter to US business group

Thursday, August 26th, 2010

The statement of the US business group, “The Business and Investors against Tax Haven Abuse”, which said that low or no-tax jurisdictions hurt the US economy by encouraging tax evasion, caused quite sharp reaction of Cayman Finance. The Cayman Finance response was published as an open letter in a political news agency in Washington, D.C., and addressed to US Senator Carl Levin endorsing the US business group. Mr. Levin and then-Senator Barack Obama were the authors of the proposed “Stop Tax Haven Abuse” bill.

According to Cayman Finance chairman Anthony Travers, the response detailed CI’s impressive compliance with international regulation and transparency legislation and spells out the country’s full income tax transparency agreement with the U.S.

Mr. Travers said that reports of the IMF and the FATF organizations show full adequacy of Cayman’s anti-money laundering regime, and that jurisdiction’s membership in IOSCO ensured proactive regulator-to-regulator disclosure. He said that the laws cited by the US business group in its claim are US laws, and all Cayman Islands companies are required to operate on the basis of complete tax and anti-money laundering transparency under Cayman law, as well as under existing treaties with the U.S. and many other G20 jurisdictions.

Mr. Travers said that, claiming that low or no-tax jurisdictions hurt the US economy through tax evasion, the business group did not take into account the tax transparency treaties and growing number of reports that suggest that international financial centres such as Cayman are well-regulated and neutral jurisdictions facilitating cross-border business and providing liquidity to international markets by increasing investments.

Also, it was stated in the open letter that the changes in US laws in order to apply US tax extra-territorially to Cayman mutual and hedge funds with US fund managers will lead to their relocation outside the US.

Cayman Islands and US sign banking agreement

Friday, August 20th, 2010

The Cayman Islands Monetary Authority (CIMA) formalised procedures for the exchange of supervisory information relating to United States and Cayman Islands banks and banking institutions operating in each others’ jurisdictions. The four main U.S. banking regulators that have become parties to the “Statement of Cooperation” are the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Office of Thrift Supervision.

The issues covered by the document include sharing of information when a Cayman Islands or US regulated bank or banking institution who wants to set up a branch, affiliate or subsidiary in the other jurisdiction is seeking approval in that jurisdiction.

According to the statement of CIMA, the agreement came into effect after several months of negotiations, and its purpose is to enable the countries “to more effectively supervise entities for which they have overall responsibility, when those entities also have operations in the other jurisdiction.”

CIMA’s managing director Cindy Scotland said that entering of the jurisdiction into this agreement also answers the IMF recommendation stated in its report for the year 2009, on the Assessment of the Financial Sector Supervision and Regulation in the Cayman Islands. This report recommended that CIMA enter into agreements with home supervisors of international financial institutions it regulates in order to manage the risks involved in the cross border operations of such institutions.

CI Premier and Minister of Finance McKeeva Bush stated that the agreement is important from a regulatory and business perspective. He said that the agreement will “enhance CIMA’s effectiveness and that of the other regulators in executing their supervisory responsibilities with regard to cross-border banking entities.” He added that the agreement provides further evidence of the jurisdiction’s commitment to regulation and international cooperation, and shows the increasing stature of the country as an international financial centre.

Cayman Islands insider trading scheme investigated by SEC

Monday, August 2nd, 2010

The U.S. Securities and Exchange Commission has filed civil charges against two Texas businessmen accusing them of violating federal securities laws governing ownership and trading of securities by corporate insiders. They are said to have organized insider trading scheme involving Cayman Islands companies and trusts, and to have received US$550 million of undisclosed gains by trading stock in the public companies “through hidden entities located in foreign jurisdictions.”

According to the SEC statement, the businessmen created an elaborate sham system of trusts and subsidiary companies in the Cayman Islands and the Isle of Man, with the purpose to sell more than US$750 million worth of stock in four public companies for which they were corporate directors, and committed an insider trading violation having received an unlawful gain of more than US$31.7 million.

Deputy SEC enforcement chief, Lorin Reisner, said that the accused persons used “the complex web of foreign structures” to conceal hunderds of millions of dollars of gains in violation of the disclosure requirements for corporate insiders.