UK releases report on Cayman’s risks
A new report released by the British government has recently claimed that the collapse in confidence in the global financial markets became worse due to apparently lax hedge fund regulations in the Cayman Islands as well as in other offshore jurisdictions.
The Foreign and Commonwealth Office (FCO) report was published in the end of November to be studied by British civil servants and politicians. Some of the findings of the report may cause some policy changes that could impact the Cayman Islands and the other territories.
The report deals with identifying and evaluating the risks to the United Kingdom from Cayman and other overseas territories in a decade.
One of the key risks indicated in the report is related to the US subprime mortgage collapse this year as worldwide market turbulence was “exacerbated by a lack of transparency over the ownership and scale of risks” within hedge funds. According to the report, most hedge funds are registered in the Cayman Islands.
It should be noted that the FCO did not criticise the Cayman Islands for its regulatory oversight itself – it drew attention to concerns raised by others that could constitute risks to the United Kingdom.
The report suggests the fact that hedge funds have structures splitting regulatory responsibilities internationally to be a problem.
It should be noted that the report by the FCO is concerned with the degree of regulatory oversight in some of the smaller British overseas territories such as Anguilla, more than of such jurisdictions as the Cayman Islands, the British Virgin Islands and Bermuda.
It should be also indicated that the report discusses the degree to which the overseas territories have met international standards as regards money laundering and terrorist financing. According it, Cayman is the only its territory that has brought a successful money laundering prosecution.