Not everybody in tax havens profits equally from offering tax avoidance services to multinationals, as noted by Richard Murphy yesterday commenting on Luxembourg Leaks. In Luxembourg, “the gain goes largely to the financial professionals within the duchy who effectively dominate its government.”
Following the announcement of more details regarding the UK’s proposed public registry of beneficial ownership, David Cameron has recently written to the British Overseas Territories and Crown Dependencies on the issue.
Predictably, the reaction in both Cayman and Jersey – the two largest secrecy jurisdictions with links to the UK – has been negative.
Compass Cayman reports on the local Chamber of Commerce and Law Society “blasting” a proposed plan for Cayman to have a public registry of beneficial ownership.
“Cayman’s largest private sector representative organization and one of its largest attorneys associations on Friday criticized United Kingdom proposals aimed at making public the list of individuals or companies that benefit from registered financial entities in the islands.
“We should not infringe on legitimate privacy by embarking on an untested and unchartered path which is inconsistent with any global standard and which certainly does not exist in competing jurisdictions,” Chamber of Commerce President Johann Moxam wrote in a letter last week about the issue to government’s Financial Services Minister Wayne Panton.”
“In order to work properly and achieve any semblance of its objective, such a proposal for a publicly accessible register of beneficial ownership would need to be universally applied by all jurisdictions,” said Alasdair Robertson, Maples and Calder partner and president of the Cayman Islands Law Society. ”
The whole article is here.
In related news, a UK-imposed fiscal responsibility framework will stay in place:
“The limits [in the Framework for Fiscal Responsibility] are there because of the liabilities the U.K. faces if it all goes wrong,” said Peter Hayes, U.K. Foreign and Commonwealth Office Overseas Territories director.”
Which quite nicely illustrates who is ultimately responsible for governing the Cayman Islands.
Back to beneficial ownership, the IFC Forum – which represents the interests of leading offshore firms – has also weighed in against public registries of beneficial ownership, saying that public registries are an intrusion into personal privacy, and that Cayman should not implement them until they are endorsed by the international standard-setting body, the FATF.
“A former Brazilian banker, who is serving a 16-year prison sentence in her home country for conspiracy to commit crime, money laundering, tax evasion and mismanagement, is suing law firm Walkers in the Cayman Islands.”
“Katia Rabello, principal shareholder and former president of Rural Bank in Brazil, claims that Walkers, acting for another client, obtained an information disclosure order while the firm still owed attorney-client confidentiality, contractual and fiduciary duties to her and other plaintiffs.”
“Ms. Rabello was convicted in 2012 and jailed last year for her role in one of the largest political corruption scandals in Brazil. The “mensalão” or “big monthly payment” case was a vote-buying scheme in the Brazilian Congress between 2003 and 2005 that used public funds to pay bribes to politicians. Banco Rural was found to have issued fraudulent loans that guaranteed the monthly payments. Certain payments were allegedly routed through its affiliate Trade Link Bank in the Cayman Islands.”
“Ms. Rabello is a plaintiff in the case, together with Cayman-registered firms Arnage Holdings Ltd., Brooklands Holdings Ltd., and East Farthing Holdings Ltd., and Fernando Toledo, a former representative of Cayman-based Trade Link Bank.
In a writ filed in the Grand Court on Feb. 4, the plaintiffs say they engaged Walkers as their attorneys from 1985 to 2010. They claim that Walkers had failed to carry out conflict of interest searches before the firm acted for “a new client with interests directly adverse to the plaintiffs.”
The full article is here.
In other Cayman news, premier Alden McLaughlin was in London recently promoting Cayman as a well regulated financial center. He was on the BBC and also at Chatham House. A sample of his talking points from the Chatham House transcript of his remarks:
“… the one segment of society that benefits greatly from the distortion of the truth is the criminals that we say we want to bring to justice. They are much less likely to operate in well-regulated jurisdictions like the Cayman Islands, where the spotlight is brightest and the attention greatest.”
“Again, truth will be the cornerstone of all effective global anti-corruption initiatives.”
“I will be forthright: no stronger interface exists between corruption and international financial centres than exists between corruption and every single country in this world.”
Compass Cayman reports that “Suspected corrupt activities were among the top five reasons banks, companies or individuals made suspicious activity reports to the Cayman Islands Financial Reporting Authority last year.”
“The authority forwards all such reports to the appropriate enforcement agency when that is required. Not every report it receives is necessarily a bona fide instance of corrupt practices.
However, the authority noted that, both at home and abroad, anti-corruption measures related to banking and investment transactions were exerting some effect on the reports the agency received in the government’s 2012/13 budget year.” Hat tip: @robertnpalmer.
In other Cayman news Company Registrations in 2013 were “robust” with the highest numbers since the financial crisis.
“Through November, 8,770 new companies were registered, a 6.2 percent jump over the same period last year. Registrations are set to exceed last year’s total of 8,971 and reach the highest number of new formations since 2008 (11,861). Annual company registrations peaked in 2007 at 14,240. The total number of active companies is likely to exceed the previous high of 93,693 in 2008.” (See also previous blogpost).
also via Compass Cayman.
Via Compass Cayman, selected quotes below:
“The Cayman Islands has been blessed with a money tree, and it’s not the silver thatch. It’s the financial services industry.”
“Fees levied on the financial sector account for about 55 percent of all government revenue, Minister Wayne Panton said during the recent Campbells Fund Focus conference.”
“…since 2011/12, revenue from banks and trust license fees has increased by 46 percent to $34 million. Over the same two years, revenue from work permit fees has increased by 23 percent to nearly $59 million, again with the financial sector contributing disproportionately.”
“Astoundingly, the highest annual work permit fee in Cayman is $32,400 for an equity partner in an accounting or law firm. The fee for each rank-and-file certified accountant is $13,650. The sector appears to be reaching a breaking point.”
“Canover Watson, managing director of Admiral Administration, warned that the fee increases are not sustainable: “In the long term, it will price Cayman out of the competition.””
Compass Cayman has the results of an online poll asking readers if Cayman should agree to the FATCA (Foreign Account Tax Compliance Act) agreement with the US.
Out of 335 respondents, 57.9% answered no, while only 14.9% said yes. The accompanying article also includes reader comments to further gauge public opinion. Sample quotes below:
“Sentiment in this week’s poll runs high and wild against Washington’s efforts to collect taxes from anyone in Cayman affiliated with the U.S., describing the move as that of a “bully.””
“One voter said FATCA was a “violation of financial privacy,” underlining others’ fears that the intrusion into the local financial-services industry, the costs of compliance and the violation of confidentiality “will be the final nail in the coffin of the local finance industry. Who pays for compliance? We all do!””
“What about our confidentiality laws? Will they no longer mean anything?” one voter asked.”
The small “yes” vote was interpreted to be “based on a grudging acceptance of reality – “Cayman has no choice but to comply or essentially quit doing business and turn away all U.S.funds”.
Compass Cayman is reporting that the Cayman Islands government has announced a public consultation on a beneficial ownership registry, following the announcement by David Cameron last week of a publicly accessible registry in the UK.
The Cayman financial sector will no doubt respond to the public consultation, and their arguments will most likely be along the lines of what the IFC Forum (a group of offshore financial companies) is already saying about the proposed UK registry: it will damage the competitive interests of the country, the risks are too high, it will be too expensive, it will be too complicated, etc.
Could this public consultation in Cayman be an opportunity to provide some counterbalance to the offshore finance sector point of view?
There must be local citizens who are not happy with a situation in which the financial sector holds over 1 trillion USD in assets while almost 2,800 homes (out of a population of 57,000) are receiving some sort of government assistance, and who are aware of some of the negative side-effects of anonymous ownership.
At the very least, it could be interesting to try and measure public opinion. For example, in the British Virgin Islands 53% of respondents to a small online poll said that the owners of Virgin Islands companies should be kept secret. The first and only comment so far on the Compass Cayman article about the consultation starts by saying “It looks as if the UK is determined to destroy the financial services industry in the Cayman Islands”.
The date and format for the consultation have not yet been announced. In the meantime, ideas and comments welcome!