28 Apr

The Cayman Islands contrasts sharply with Panama

The Cayman Islands’ status as a robust and reliable international wealth management and financial services centre has been underlined by the revelations contained in the Mossak Fonseca Panama Papers leaks, with not one single mention of Grand Cayman contained within the millions of pages of leaked documents.

There are many reasons for this, but perhaps the most important factor is that unlike many so-called “tax havens” – for example Panama or Macau – the Cayman Islands has succeeded in marrying very high compliance standards – the British Overseas Territory is compliant with the OECD’s standards on automatic tax information exchange – with rules and regulations that make for a very favourable financial jurisdiction. Contrast this with the situation in Panama, which according to the OECD, “must put its house in order” by immediately implementing these [international tax transparency] standards.”

However, the fact that the Cayman Islands has managed to steer clear of the controversy generated by the 11 million leaked documents has not stopped some within the British media from making reactionary calls for all British overseas territories (BOTs) to accept a central register of beneficial ownership. Critics and civil liberty campaigners have been similarly quick to point out that any such central register would not be in keeping with the fundamental British principle of a right to a private life. Critics of Grand Cayman are missing the point: for around 40 years the Cayman Islands has been at the forefront of the fight against illegal financial activity and tax evasion while also presenting a realistic and workable alternative to jurisdictions such as Panama. Whatever the case, experts have predicted that a central register is unlikely to make much difference to outcomes for either Cayman financial services providers or their customers.

Jude Scott, CEO of Cayman Finance believes that “agreed enhancements to this system will ensure proper authorities conducting legitimate investigations can quickly identify all companies that a particular beneficial owner has a stake in without needing multiple requests and that those owners not be alerted to the existence of an investigation.”

“Industry and government have worked side-by-side to implement a legal infrastructure that promotes effective transparency and cross border cooperation with law enforcement that meets, and in some cases exceeds, international regulatory standards and comparable regimes in G20 countries,” he added.

The Panama Papers have caused considerable collateral damage to the global political elite. They have already resulted in the resignation of Iceland’s Prime Minister Sigmunder David Gunnlaugsson, while also engulfing the President of Argentina Maurico Macri, the President of Ukraine, Russian President Vladimir Putin and, even if it is only through familial association, the UK Prime Minister David Cameron.

If anything, the Panama Papers leaks have raised perceptions of both ethics and efficacy in the Cayman Islands’ financial and wealth management services industry; there have been no reasonable allegations of tax evasion and the leaks have only served to highlight the fact that Cayman’s legal and globally beneficial offshore structures for intelligent tax minimisation are working effectively. For anyone who believes in the fundamentals of a free market defined by solid reward for intelligent investment it is clear that the Cayman Islands are flying the flag, particularly at a time when an ageing population require confidence that their pensions arrangements and regular savings are going to outlast them.

“Cayman maintains its position on the right side of the law. Until onshore governments change their tax rules to outlaw what is currently legal tax avoidance, I suspect little will really change for Cayman so long as it continues to comply with global standards on tax transparency and information exchange,” commented one lawyer, a specialist in tax, pensions and wealth management law.

“Cayman is really quite different to Panama in terms of reputation, regulatory regime, compliance with global standards, quality and sophistication of law firms, other service providers and our regulator. The bulk of Cayman business is investment funds, many of which have institutional investors.”

What makes Cayman so attractive?

The Cayman Islands really is the destination of choice for so many international investors, particularly those of high net wealth looking to change their country of residence.

Not only does its financial services market offer stability and opportunity for growth, it provides balance through its access to multiple investment sectors and established companies.

High returns from targeted investment in the “world’s friendliest expat destination” are another feature of wealth management in the Cayman Islands, while its clear seas, white sands and paradisal climate are a bit of draw too.

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