Archive for October, 2015

Brazilian wealth uses Cayman funds in complex environment

Thursday, October 29th, 2015

The use of Cayman Islands funds as a wealth management tool for high net worth Latin American families was debated last week at the STEP LatAm Conference in Brazil.

Outbound investments are attractive for Brazil’s wealthy for many reasons, such as protection against political risk and the risk of holding assets in the local currency. Privacy and security protection is a huge concern in Brazil as the threat of kidnap and even murder is just an everyday part of doing business there. The stories about wealthy executives driving around in old, beaten up cars to avoid drawing attention to themselves are true and they are a good reason to seek asset protection offshore.

While Latin America presents significant opportunities for offshore firms to expand services into this fast growth region, structuring deals though Cayman for Brazilian investors, particularly downstream M&A from the explosion in private equity money, is not always straightforward. Exchange controls and other regulations on the movement of money in many Latin American countries complicate matters and Cayman’s Tax Information Exchange Agreement (TIEA) network in the region, while taking shape, is not complete.

As Andrew Miller, partner with Walkers, explained in his presentation on ‘Information Exchange from a Cayman Perspective’, Cayman has currently signed TIEA with Brazil as well as with Argentina Mexico. While the Argentinian and Mexican agreements came into force in 2012, the 2013 agreement with Brazil has yet to. Brazil also still classifies the Cayman Islands as a tax haven or “fiscal paradise”.

Nicholas Pattman, senior counsel at Walkers, said: “As the leading offshore investment funds jurisdiction, the Cayman Islands’ fund products, its legal and regulatory framework and the quality of its service providers continue to ensure it is the offshore jurisdiction of choice for Brazil”.

Threats revealed to Cayman’s AML regime

Saturday, October 10th, 2015

The Government of the Cayman Islands faces some serious challenges over the next 1.5 year to update the regulatory regime that protects the jurisdiction’s financial service sector ahead of a task force inspection in March 2017. Francis Arana, head of the Anti-Money Laundering Unit in the Attorney General’s Chambers, who is coordinating the Cayman Islands’ National Risk Assessment (NRA), has revealed some serious deficiencies in the current legislation, weakness in supervision and a lack of suitable sanctions, which need to be addressed before the Financial Action Task Force (FATF) begins its assessment.

Speaking at a compliance and financial crime conference, Arana revealed that countries are now obliged to complete as part of the new more stringent FATF requirements introduced in 2012. Cayman was last inspected in 2007 under the old rules and was largely compliant in 38 of the FATF 40 recommendations regarding the measures in place to prevent money laundering, as well as tax evasion and terrorist financing.

But it is now facing a much tougher test at a time when the anti-money laundering and other related laws and regulations are out of date, when there is insufficient legislation to cover all the business risk areas outside of the offshore sector.

“We have outdated anti-money laundering (AML), terrorism and financing laws that are in urgent need of updating,” Arana told the conference audience. He noted that while international financial crimes are taking place in other jurisdictions, Cayman is vulnerable to the laundering of the proceeds from those crimes. According to him, tax evasion, drug trafficking, fraud, including securities fraud generally happen elsewhere but Cayman’s financial system may feature in the criminal process further down the line.

UK continues to press for beneficial ownership registry in Cayman

Saturday, October 3rd, 2015

The British Prime Minister David Cameron has stated that not enough is being done to tackle tax evasion by the UK’s overseas territories. Speaking during a trade mission to Jamaica, Cameron said he is not happy with the way some British overseas territories are resisting financial transparency, signalling a new wave of pressure ahead on Cayman and other offshore financial centres.

On a recent trip to Cayman, the acting overseas territories minister, Grant Shapps, had seemed content with the progress Cayman was making but the prime minister has now said not enough progress was being made towards transparency.

Previously, the premier, the financial services minister and industry representative have warned that a central public register would cause a serious threat to the country’s financial services sector and they believe that Cayman already had far more sophisticated mechanisms to exchange information to the relevant authorities than most onshore jurisdictions, which not collect the information on beneficial owners.