The Cayman Islands stands as a convenient whipping boy for onshore jurisdictions who love to perpetuate the myth that the Cayman Islands is a tax haven, according to the Cayman Islands Monetary Authority’s Chairman George McCarthy speaking at last month’s International Funds Conference. Business Editor Lindsey Turnbull reports on the new vision that McCarthy says the islands must now adopt if the jurisdiction is to continue its pre-eminent position within the global financial stage.
The financial services industry is, in George McCarthy’s words, “crucial to the economic survival of the Cayman Islands”, providing jobs, housing, healthcare and education for local residents and effectively maintaining the islands’ way of life. Thus ensuring its success must be of paramount importance to everyone residing here.
Speaking at January’s International Funds Conference, organised by Stuarts and Krys and Associates and held at the Ritz-Carlton, McCarthy said that the recent international initiatives undertaken by the Cayman Islands government (i.e. the signing of the Tax Information Exchange Agreements with a plethora of countries) was a good expenditure of energy, but it was now time to see what needed to be done at home “on the ground.”
“The international media perpetuates stereotypes here which do not apply,” McCarthy said, indicating that the jurisdiction was a “convenient whipping boy” for these onshore countries.
Cayman could not, however, continue to simply cry out that it is just being victimised.
“We must ask ourselves which criticism is justified? What are our weaknesses? How can we get rid of this tax haven label?” he said.
McCarthy went on to say that the islands needed to examine what the traditional views of a “tax haven” actually were and work hard to ensure that it combats each and every element. He highlighted no regulation, lack of information exchange between jurisdictions, lack of real physical presence on island, the fostering of tax evasion and lack of transparency as particular elements of the traditional tax haven.
McCarthy said that Cayman has successfully had in place for a number of years robust regulation and a tough stance on tax evasion as well as a strong infrastructure relating to the exchange of information between jurisdictions; however Cayman needed to look at establishing greater physical presence on island as well as a need for greater transparency.
“Cayman was not the cause of the financial crisis but it has also not escaped the effects and consequences,” he said. And he also indicated that there had been increased targeting of jurisdictions such as the Cayman Islands resulting in increased scrutiny and the threat of sanctions. Having Cayman removed from the OECD’s ‘grey list” of countries was a crucial move and McCarthy said that Cayman should continue to work towards “contributing to the stability of the global financial system and continue to remain abreast of new standards to be adopted if we are to stay in the game.”
At the CIMA they were working to improve statistical information collection which would result in enhancing Cayman’s transparency as a whole.
“We need to embrace a new vision whereby individuals play a pivotal role,” McCarthy said. “We need a personal commitment to ensure transparency of operations. There is no room for the mindset of cutting corners. We need to make it loud and clear that the Cayman Islands is not a place for questionable operations and we need to lift the fog of suspicion through which this jurisdiction is sometimes viewed. The attitudes and actions of one affect us all.”
McCarthy also said that everyone in the Cayman Islands needed to appreciate how the financial services industry affected them, with the failure of a financial services institution leading to detrimental effects on the common people as well as sophisticated investors.
“We all feel the pain when the system does not work,” he said. “We have to all talk straight and walk straight. This is integral to transparency.”
He went on to say that Cayman has two choices: to continue with the view and speak the mantra that Cayman holds little regard for international perception or take a good look to see what changes need to be made and then make those changes.
To ensure that Cayman takes the latter approach,, McCarthy had instigated the beginning of a five year strategic plan, the beginning of which has seen heads at the CIMA (such as himself, Cindy Scotland, CIMA’s managing director, and Patrick Bodden, CIMA’s deputy managing director) join forces on a steering committee to develop a plan to carry this through. The next step will be to approach practitioners within the industry for their input in this crucial new development plan.
“This plan will play an integral part in Cayman’s overall economic plan and will provide a guide for the industry,” McCarthy confirmed. He continued: “This strategic five year plan will be on the Premier, McKeeva Bush’s desk by June of this year for approval and will then be made a public document.”
McCarthy spoke about a recent visit to Singapore in which his experience with Singapore’s immigration and customs departments opened his eyes about just how efficient and welcoming such an entity could be.
He detailed: “One of our party was approached by a Singapore immigration officer immediately after passing immigration. They were asked how long it took to clear the department to which they replied: seven minutes. The officer then apologised profusely and said it should only have taken three!”
The entire experience from start to finish during his stay in Singapore was, according to McCarthy “wonderful”.
He concluded: “The Premier has said that he wants to Cayman to be the Singapore of the Caribbean. We have the potential; we just need the right mindset. Everyone in every area of business in Cayman – government and the private sector – needs to work together to keep this vision in mind.”
Read more from the International Funds Conference in future editions of The Journal.