Cayman Islands Financial Services

It has been discussed that a recent report named the Cayman Islands the world’s 2nd most secretive finance jurisdiction. This has led Cayman industry insider to call for a better defence against “those who would bury places like Cayman”.

The ex-chairman of the Cayman Islands Monetary Authority (CIMA), Tim Ridley has spoken to comment on the publication of the Tax Justice Network ‘s (TJN) Secrecy Index that accused the offshore jurisdiction of making “shallow efforts” in cracking down on fiscal evasion.

Mr Ridley said: “The recent, highly subjective and somewhat ‘short on substance’ secrecy report by the Tax Justice Network underscores how essential it is that Cayman presents the accurate position whenever and wherever possible and to those that matter”. He stated that “those who would bury places like Cayman are in deadly earnest”, so the future of Cayman financial services industry is at stake.

Carlos de Serpa Pimentel, chairman of STEP Cayman Islands, suggested that the Cayman Island’s dealings as an offshore jurisidiction actually helped the world’s economy by providing a tax neutral platform for international transactions. “In other words, the existence of Cayman facilitates the workings of the world’s financial system and makes it more efficient,” he said.

According to British newspaper Morning Star, tax activists drew their attention to the Cayman Islands. They demanded that Britain bring the jurisdiction, which they called one of the world’s biggest tax havens, to account.

The Tax Justice Network’s financial secrecy index said that the Cayman Islands is one of the world’s most secretive financial centres. The jurisdiction is one of British Overseas Territories having economic autonomy. According to Morning Star, income or corporate taxes has made them the hedge fund capital of the world, with more than 90 000 companies doing their business through this offshore jurisdiction. A study of 72 countries revealed that the Cayman Islands is the 2nd most secretive nation (the 1st is Switzerland).

On October 4, a separate report was released that accused the offshore jurisdiction of playing a “key role” in the 2008 global financial crisis. The report said: “Cayman’s relaxed funds law served as the bedrock of the hedge fund industry which now sees Cayman as its top domicile. It also saw Cayman attract a very large share of major new sectors in financial engineering such as private equity, debt and bond issues and securitisation”.

In February 2011, Barclays admitted to using Cayman subsidiaries to slash its tax bill to 1%. Barclays chief executive Bob Diamond said that the bank had used at least 181 offshore subsidiaries in the Cayman Islands to cull its tax burden to just GBP 113 million despite racking up GBP 11.6 billion in annual profits.

It has been announced by the Cayman Islands that the offshore jurisdiction has entered into an agreement on sharing tax information with China.

On September 26, the signing ceremony was held. At the event, the Cayman Islands’ Premier, McKeeva Bush said that signing this Tax Information Exchange Agreement is a significant step in enhancing the relationship between the Cayman Islands and China. He noted that China is one of the fastest growing economies in the world, so he expressed his confidence that this TIEA will contribute positively to economic activity between the two jurisdictions.

Bush said: “This is 26th signed agreement for exchange of information for tax purposes, and the People’s Republic of China has become another member of the G20 countries to have a TIEA with the Cayman Islands.”

Bush co-signed the agreement with Song Lan, the State Administration of Taxation Deputy Commissioner and Vice Minister. Both parties must conclude their individual ratification procedures before the agreement enters into force.

A request from the government for an across the board visa waiver for Jamaicans coming to the jurisdiction has been rejected by Governor Duncan Taylor.

According to a statement issued by the Office of the Governor, Cabinet had considered a proposal to ease the visa requirements for Jamaican nationals with a view to make it easier for children and the elderly to enter the Cayman Islands. The proposal could also foster business visitor travel from Jamaica. The government had recommended to remove the existing requirement to obtain a visitor’s visa for Jamaicans wishing to visit the Cayman Islands who are under the age of 15 years or over the age of 70 years or in possession of a valid Canadian, UK or US visa.

The statement said that the Governor was content on the first 2 points, however, he did not agree to the visa requirement being waived across the board for those Jamaican citizens holding valid Canadian, UK or US visas. He said: “I know that the vast majority of Jamaicans are law-abiding citizens. This includes residents who make a positive contribution to our society and economy in the Cayman Islands; and short-term visitors, including business visitors, whose visits are welcome and trouble free. There is, unfortunately, a small minority who has the potential to cause problems”. Taylor noted: “The Cayman Islands Immigration Department does not have the capability to determine whether such a visa is genuine or not and the respective countries have indicated that they are unable to provide the Cayman Islands with the access to the resources on which they rely to make these determinations.”

Taylor said that the introduction of a visa regime for Jamaicans in 2005 led directly to a significant reduction in the involvement of Jamaicans in crime in Cayman. He added: “Lifting the visa requirement as proposed could potentially allow unscrupulous Jamaican visitors to gain entry to the Islands using forged or counterfeit visas which could have a significant negative impact on the security of the Cayman Islands”.

On September 12, it was announced by Consolidated Water Co. Ltd. (NASDAQ: CWCO) that the Board of Directors has declared a quarterly cash dividend of USD 0.075 per share.

The dividend is payable October 31, 2011 to shareholders of record at the close of business October 1, 2011.

Consolidated Water Co., the company that develops and operates seawater desalination plants and water distribution systems where natural supplies of potable water are scarce or nonexistent, operates water production and distribution facilities in the Cayman Islands, as well as the BVI, Belize, and the Bahamas.

The Company was established in 1973 as a private water utility in Grand Cayman and obtained its first public utility license in the jurisdiction in 1979.

Offshore Incorporations Limited (OIL) is opening its first European office in London. This leading global company formation specialist based in Asia commented that the move will allow to further support Asia-based companies which increasingly require international structures to facilitate strong capital flows from Asia to Europe.

Offshore Incorporations Limited serves professional intermediaries. The company specializes in offshore company formation the Cayman Islands as well as Anguilla, the Bahamas, the British Virgin Islands, Delaware, Hong Kong, Mauritius, Samoa, the Seychelles and Singapore.

CEO for OIL, Martin Crawford, said that this is the 1st step aimed to expand OIL’s presence across Europe and it is an exciting milestone for the business that has just celebrated 25 years in Asia. He said: “We wish to continue supporting our clients as they grow globally and require a wider variety of services for their offshore activities. You just need to look at the fact that over 50% of new properties in London are purchased by Asian investors to see the growth in demand.”

Security authorities of the Cayman Islands are beefing up customs security at all entrance points because of rising fears that criminal and narcotics gangs from other regional locations are targeting this Caribbean territory.

As armed drug gangs relocate to the area in response to a vigorous crackdown on their activities by the US, Mexico, Colombia and other countries, neighboring territories in the Caribbean and Latin America are facing increased criminal activity.

Canadian security technology firm Smiths Detection will provide the jurisdiction with the tougher customs entry measures. According to Smiths Detection, the contract covering the service was its largest so far with the Cayman Islands Customs Department.

It has been discussed that a special economic zone is to be launched by the Cayman Islands, in partnership with Cayman Enterprise City (CEC). The signing of an agreement with CEC has been announced by the government of the Cayman Islands. The newly-signed document allows the developer exclusive rights to construct, develop, operate and maintain a special economic zone (SEZ) in the Cayman islands. The agreement is aimed at attracting global science, technology, commodities and derivatives, media, and educational entities to the Cayman Islands.

McKeeva Bush, the Cayman Island’s Prime Minister said that CEC provides an opportunity for the jurisdiction to diversify its economic base. He also noted that this project requires no government investment because it will be completely privately funded. Also, the developer has not requested waivers for duties on materials or stamp duties.
While SEZs exist in a number of developed and emerging economies, the Cayman Islands’ SEZ will be the 1st in the Caribbean region.

Jason Blick, the CEO of CEC, said that the cooperation and inward investment-friendly attitude of the government of the Cayman Islands and the Civil Service have been outstanding. He noted: “They truly understand the positive effect the zone will have on Cayman, and their support has been incredible.”

The development of CEC’s 5 “parks” (Cayman Internet Park, Cayman Media Park, Cayman Biotech Park, Cayman Commodities Park, and Cayman International Academic Park) will be phased, with construction of the 1st phase expected to begin in 2012.

Currently, the Cayman government is to start establishing the legislative framework for CEC to operate.

Companies residing in the Cayman Islands and Luxembourg have been hit with a tax bill of more than $738 million as the Australian Tax Office (ATO) sharpens its focus on the private equity firm behind the 2009 float of the retailer Myer.

In accordance with the documents filed in the Federal Court, the Tax Office has demanded more details about Texas Pacific Group’s Australian operations and who issued its local head, Ben Gray, with instructions relating to the offshore chain of ownership that controlled Myer from 2006 until 2009.

The Tax Office contends that after pocketing $1.5 billion of Myer float proceeds in November 2009, the Cayman Islands-based TPG Newbridge Myer Ltd and Luxembourg-based NB Queen SARL should have paid $452 million in income tax.

The Tax Office has issued the assessments for companies that demand the outstanding $452 million plus $226.12 million in penalties and $60.49 million interest.
Proceeds from the Myer float were channeled through a corporate structure that spanned 4 jurisdictions: from Australia the funds moved to NB Swanston BV in the Netherlands, then to its parent company, NB Queen in Luxembourg, which transferred the proceeds to TPG Newbridge in the Cayman Islands.

The ATO obtained a Victorian Supreme Court order freezing TPG’s bank account in Melbourne, but this account had already been drained.

Now the Australian Tax Office has obtained fresh orders from Justice John Middleton in the Federal Court clearing the way for it to leave notices of demand at the South Yarra home of Mr Gray, the chief executive of TPG in Australia.

The Australian Tax Office has already demanded details from Gray about the ownership of the Cayman-registered company. According to correspondence released by the court, Gray told the ATO that the Cayman Islands company was owned by 3 funds: NB Asia IV (51.7%), TPG IV (34.5%) and Blum Capital (13.8%).

As part of its global expansion strategy, Investors Trust Assurance SPC has recently joined the Association of International Life Offices (AILO), a non-profit organization comprised of the most important companies of the international insurance industry, based predominantly in financial centres within the European Economic Area and UK Crown Dependencies, such as the Cayman Islands. AILO will be a valuable resource to allow Investors Trust to successfully approach potential markets in Europe, Middle East and Asia.

Investors Trust is an insurance company registered in the Cayman Islands. It offers unit-linked and fixed income investment products to middle market investors worldwide.

The AILO organization has been the main trade consultant for the international financial services industry since 1987. It represents the interests of this particular sector. This international insurance company is licensed and regulated by the CIMA.

Investors Trust will be participating in the next annual general meeting scheduled for October 2011, which will take place in London, which will provide it with an opportunity to share experiences and new challenges as well as to meet colleagues and competitors.