Cayman registers almost 20% of FATCA Foreign Financial Institutions globally; more than the UK, Switzerland and Luxembourg combined

Guernsey – population 65 thousand – was recently reported to be eighth worldwide in number of Foreign Financial Institutions registered under the US Foreign Account Tax Compliance Act (FATCA). FATCA, which became law in March of 2010, requires foreign financial institutions (FFIs) with US clients to register with the IRS.

Which countries have registered the most Foreign Financial Institutions under FATCA so far?

Read more…


Bermuda reinsurance mystery solved? (spoiler alert: involves tax and hedge fund managers)

A persistent puzzle when tracking the business news in Bermuda (FSI rank: 14) has been the number of mentions of reinsurance deals. The Bermuda Royal Gazette online even has a dedicated re-insurance page, which is updated almost daily.  Why would Bermuda (population 64 thousand) hold 14% of the global reinsurance market, the same as Switzerland and more than London?

Read more…

News from the UK’s satellite secrecy jurisdictions shows extent of UK influence

If the UK and its satellite secrecy jurisdictions were taken together, they would constitute the largest secrecy jurisdiction in the world, according to their scores on the 2013 Financial Secrecy Index.

In these jurisdictions such as Cayman, Jersey or BVI the UK has extensive powers, for example to appoint key government officials and approve laws.

Three recent local news items from Cayman and the Bahamas underscore the extent of the UK’s influence in everyday governance:

Read more…

Offshore wealth advisor: “British territories are definitely out”

Following the media in secrecy jurisdictions sometimes leads to the websites of offshore secrecy suppliers offering “wealth protection” and “sovereign investment”. These companies almost invariably have an ideological sales pitch, along the lines of “we provide asset protection for those who don’t trust the government”.

Read more…

Cayman news: the case for offshore?

A column published in April in the Cayman Financial Review makes the case for offshore.

It starts by claiming that the arguments of offshore’s critics are based on a “profound misunderstanding of how financial transactions occur. A series of incorrect assumptions about money, business, finance and government underlie them. These assumptions are disguised by often over-heated rhetoric and pseudo-scientific or completely unscientific calculations.”

Read more…

“Judicial question time” in Hong Kong with offshore judges from Bermuda, Cayman and BVI

Via the Bermuda Royal Gazette:

Judges from various secrecy jurisdictions including Bermuda, the British Virgin Islands, Singapore and the Cayman Islands attended a conference in Hong Kong on “insolvency and corporate rescue”, dealing with “business failure in the substantial investment structures using offshore companies as a platform for investing in China.”

Read more…

Cayman news: Chamber of commerce and offshore lawyers team up against UK beneficial ownership plan

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.

Leading academic claims offshore centres good for development

Jason Sharman is a respected academic who has written about money-laundering and shell companies for the World Bank and is regularly cited as an expert. One of his most well-known findings is that it is easier to open an anonymous shell company in OECD countries, in particular the US and the UK, than in offshore secrecy jurisdictions such as Cayman.

Which is why it is rather confusing and disappointing to find this paper by Sharman from 2010 and its accompanying press release. The press release says that “International Financial Centres can boost growth in developing countries”. The paper concludes “…the evidence presented in this paper suggests that there is much to be gained by developing countries cultivating closer relations with IFCs to foster growth and reduce poverty”.

The proposed link between International Financial Centres (IFCs) and development is via the “sophisticated, robust and efficient institutions” in IFCs. Using China as an example, the argument is that “Chinese firms as well as foreign investors form links with IFCs to capitalise on the efficient, transacting-cost-reducing institutions IFCs host.”

So the fact that the British Virgin Islands, for example, is one of the top ten Foreign Direct Investment sources into China is not really due to round-tripping, corruption or tax evasion but to investors taking advantage of BVI’s strong institutions to compensate for Chinese weak institutions.

There are several other things which seem odd about the paper, but I’ll just mention a couple before moving to the really worrying part. For very useful guides to counter the “tax havens are good” narrative please see the Tax Justice Network here and the Treasure Islands blog here.

If the claim is that IFCs help developing countries by enabling investment inflows which would not happen otherwise – for example the 41 billion USD invested into China from BVI in 2008 – shouldn’t these inflows at least be netted against the the illicit financial outflows developing countries lose? Global Financial Integrity estimates that 2.8 trillion USD flowed illicitly out of China from 2005-2011,out of which USD 595 billion ended up in tax havens. And wouldn’t it also be worth looking at who benefits from doing business with IFCs (mostly rich elites and multinational corporations) and who usually loses (the general population that relies on state health, education and infrastructure)?

The most worrying thing about the paper, though, is not the content but the fact that is that it was jointly commissioned by the Commonwealth Secretariat and the IFC Forum. The IFC Forum is an offshore lobby group composed of “law and accounting firms headquartered in Bermuda, the British Virgin Islands, the Cayman Islands, Guernsey, Jersey and Mauritius” including practically all the members of the offshore Magic Circle. Its secretariat at the time was a London PR firm.

The press release for the paper includes this:

“Sharman also finds that there is insufficient evidence to support the two common misconceptions surrounding IFCs; that they drain wealth from developing countries or that they are used for tax avoidance. In fact, the report finds that small IFCs are crucial intermediaries for trade with and investment into developing countries.”

The point is not to bash Jason Sharman here. But I can find no evidence of any direct challenges to his “IFCs are good for development” claim, and the paper seems to have gone largely unnoticed. In the meantime, Sharman’s findings on money-laundering have definitely been picked up by Cayman’s government and media with headlines such as “Cayman’s perfect compliance record“.

At the very least, it seemed worth mentioning.

Offshore provider: company registrations recovering from recession, total now 5% above 2008 levels

Offshore service provider Appleby yesterday published a report (pdf) with statistics on company registrations in Bermuda, British Virgin Islands, Cayman Islands, Guernsey, Isle of Man, Jersey and Mauritius. All of these jurisdictions are in the top 20 on the 2013 Financial Secrecy Index except for the Isle of Man, ranked 34th.

“As the global economy appears to be stabilising, the company registration data reveals that levels of new company registrations in several jurisdictions have accelerated following a faltered growth pattern during the second half of 2012.”

“In the first half of 2013 there were 38,416 new offshore company incorporations in total. Although this represented a small decrease of 3% on the preceding six months in 2012, this was primarily due to a seasonal decline in incorporations in the British Virgin Islands (BVI), which has a disproportional effect on the total figures. Elsewhere, with growth at around 8-9%, most offshore jurisdictions are close to growth levels seen in onshore comparators the UK and Hong Kong. The UK is, as we would expect, leading this growth with an 11% increase.”

Looking a bit closer at the data in the report, it would have made sense to also compare numbers for the first half of 2013 with the same period in 2012 rather than just with the second half.  But this would have shown either a 9% fall year-on-year if BVI is included, or a slight fall of 0,3% if BVI is excluded, which doesn’t fit as well with the upbeat message an offshore service provider wants to be sending to its customer base.

In any case, despite its decline BVI “continues to dominate offshore new company registration activity by volume, and has consistently maintained a six-fold lead ahead of its nearest comparator, the Cayman Islands, and kept up a steady pace of circa 30,000 new companies registered each half year”.

The graph below shows the leading role of the British Virgin Islands among these 7 offshore markets.

New offshore company incorporations, first half 2013

company registrations


Source: based on data compiled by Appleby Global

The report also has statistics on the total number of companies registered in the seven jurisdictions: 674.385 as of the 1st half of 2013, a figure “5% larger than pre-recession 2008”.

Overseas territories “not tax havens” press coverage sample

David Cameron’s comment that “I do not think it is fair any longer to refer to any of the overseas territories or Crown dependencies as tax havens” has gathered extensive coverage in secrecy jurisdiction press. Here are a few examples:

The Gibraltar Chronicle has a statement from the leaders of Overseas Territories – who were meeting in Gibraltar last week – saying: “Our territories are well regulated, independent financial services jurisdictions, and play an integral role in facilitating global business. We will continue to lead on meeting international standards of tax and transparency”

International Adviser says that Jersey, Guernsey and the Isle of Man “revel” in Cameron’s “not tax havens” comments.

Additionally, in Jersey Cameron’s comments were seen as an endorsement in the same week as a visit by the Lord Mayor of London, while in Guernsey the finance industry is preparing promotional events in Asia.

Cayman Finance said that “the transparency of the Cayman Islands financial services industry that had been built over the past four decades was finally being recognized.”

“…we believe it is about time Cayman starts to receive some credit,” said Gonzalo Jalles, CEO of Cayman Finance.

In Bermuda coverage picked up comments from Cameron during the parliamentary debate in which he said: “For many years, Luxembourg and Austria have held up progress on this issue. They have often tried to get round that by pointing to the overseas territories and Crown dependencies of the UK, which have now put their house in order, so we can turn back to Austria and Luxembourg.” The whole exchange can be found on the website; Cameron was responding to Jack Straw.

The Bermuda News website also linked back to comments by Finance Minister Bob Richards in June of 2013, saying that Overseas Territories are being used as “scapegoats and distractions from domestic policies and domestic policy failures.”

So far there seems to have been very limited coverage of Cameron’s comments in the UK and international press.