Tuesday, August 27, 2019

Tourism in the Cayman Islands: Is there a breaking point?

As annual visitor numbers edge closer to 2.5 million, the question arises: Has the Cayman Islands reached the tipping point on tourism?

Some on island are of the view that it is time to take a long-haul look at efforts to attract more visitors and to continue to critically evaluate proposals such as the new cruise port and the issue of private beach access, for example.

Others, however, say that Cayman is far from the point of being overwhelmed by tourists, and that there is still much room for growth in accommodations and real estate development.

In January, it was reported that nearly 2.4 million visitors arrived in the Cayman Islands in 2018, the highest number recorded for a single year. The total air and cruise ship arrivals in 2018 was up 11.05% over 2017.

Each of the first four months of 2019 were record-breaking ones, with a total of 191,883 visitors touching down at Owen Roberts International Airport, compared with 173,227 for the same period last year – an increase of more than 10% on what was previously Cayman’s best year for stayover visits.

In a press release, the Department of Tourism noted that visitor spending was an estimated $305 million in the first four months of this year.

After the January report on visitation numbers, Minister of Tourism Moses Kirkconnell noted the government’s commitment to investing in the cruise port and airports.

“These much-needed upgrades will benefit [our] tourism operators, businesses, visitors and residents,” he said in a press release.

The proposed new cruise port, in particular, has been a source of debate on island for many months.

“Thousands of people are negatively impacted by traffic, yet we are considering significantly increasing cruise ship visitors arriving in George Town,” said Gabriella Hernandez of Save Cayman, a non-profit grassroots organisation with a focus on sustainable tourism.

“What is ultimately important is a clear development plan that takes into consideration what our islands can feasibly support,” she said. “Maybe it is time to consider if more visitors is better, or if we ought to focus on the quality of experience we provide for visitors that would let them choose us for years to come.”

Room to grow

Others believe there is still plenty of room for more visitors, and that the quality of what Cayman has to offer is only getting better.

“We are far from reaching a breaking point for tourism,” said Kim Lund, RE/MAX Cayman Islands owner/broker. “Of over 2 million tourists in 2018, only 463,000 were overnight tourism needing accommodations (there were already 354,000 in 2000). We still have plenty of capacity to accommodate more tourists.

“In the last five years,” Lund said, “capacity increased by 33%. This was due to new tourism development and previously non-rental accommodations becoming available, attracted by strong revenues through Airbnb, VRBO, better rental rates, owner websites, etc.”

A report in the Cayman Compass in February stated that last year, 340 local Airbnb hosts drew 14,600 guests to the islands. Visitors stayed, on average, for about six days, according to data from Airbnb.

Cruise ship passengers board a tender to return to their ship in George Town harbor. G- Photo: Taneos Ramsay

Lund added that many more tourist accommodations are coming, including the Hilton (90 rooms) and Grand Hyatt (357 rooms), among others.

Having said that, Lund acknowledged that large annual increases in tourism are not sustainable, but that the numbers will eventually level off.

“The Department of Tourism has done an excellent job in targeting high-quality tourism versus focusing on mass market tourism of lower quality and higher volume,” he said. “Our quality tourism spends more on vacation and buys real estate because they are more affluent, while having less impact on Cayman’s infrastructure because of the lower volume.”

Theresa Leacock-Broderick, president of the Cayman Islands Tourism Association, said, “Of course there could be a breaking point, particularly if the numbers of visitors should ever start to diminish the quality of the visitor experience.

“The National Tourism Plan addresses several situations in need of managing and improving our product as well as visitor experiences. However, in terms of strategy, the unknown, or rather the undeveloped, is the establishment of a manageable capacity limit, particularly in regards to the mix of cruise passengers and stayover visitors.

“Finding the appropriate percentage mix between cruise and stayover visitors and ensuring that the levels are not detrimental to the environment nor our sense of place and harmony” is the best way to achieve a balance with tourism, Leacock-Broderick said.

Grand Cayman’s Seven Mile Beach

Hernandez added: “We have long been known for our tranquility and beauty [but] in more recent years of rapid and unplanned development, this has been compromised, and we hear from many visitors that they are not happy with the direction Cayman is going in.

“A comment we always hear is that if they wanted to be in a place that was overdeveloped, unsafe and stressful, they would stay home or go elsewhere. Now, they feel there are alternatives to Cayman.

“We need to realise and operate on our strengths which have made us a top tourism destination,” she said.

Hernandez’s perspective on the current impact of tourism highlights Save Cayman’s concerns.

“We are experiencing overcrowding on our beaches and sites such as Stingray City, which ultimately degrades the quality of experience for our visitors,” she said. “We as a country are now considering the development of Barkers beach because Seven Mile Beach, our main attraction, is overcrowded with our current visitor numbers.

The best way to achieve a balance between tourism and protecting the environment, she said, is to “engage the community and those with the expertise, knowledge and care to draft a long-term development plan that balances social, environmental and economic needs fairly as they are intertwined”.

Cayman’s Seven Mile Beach

Some sectors, notably government, are pleased with the direction – and the benefits – of Cayman’s tourism.

In a statement released in April, Tourism Minister Kirkconnell said, “Our thriving tourism sector continues to be a major contributor to the growth of our local economy. We are pleased that the investment in our tourism product from both the public and private sector positively impacts Caymanians and those who have made this dynamic sector their profession.”

Leacock-Broderick said, “Timing is everything. Both the public and private sectors in Cayman collaborate well together to attain greater results. There are also significant advertising dollars spent by brands that collectively have an impact on attracting visitors to our shores, including the airlines and airlift opportunities. However, one of the the major influences on our successes are our repeat guests, who simply love the Cayman Islands. They keep returning and telling others about their experiences; word-of-mouth goes a long way in this regard.”

Lund also underscored the benefits of tourism: “While we have an active residential real estate market, tourism provides the demand that necessitates new hotels and condominium developments, retail locations, restaurants, tours and services, etc. It is the engine for creating more jobs, stimulating the economy and improving the standard of living.”

Sustainable tourism

Hernandez looks to sustainable tourism as the key to preserving what Cayman has to offer.

“Sustainable tourism means that we are utilising our resources in a manner that will benefit both current and future generations,” she said. “These days, many younger tourists are keen on authentic experiences, providing greater opportunity and direct access for local, small businesses to share what makes us unique.

“Exhausting our resources for short-term gain is foolhardy and will not create the necessary level of self-sufficiency and long-term economic viability we need to aspire to,” she said. “We can look at other jurisdictions and how they have dealt with these issues for guidance.”

A tender ferries passengers to a cruise ship in George Town harbor. Plans for a cruise berthing dock in Grand Cayman mean tenders would no longer be required. – PHOTO: CHRIS COURT
A tender ferries passengers to a cruise ship in George Town harbor. – PHOTO: CHRIS COURT

CITA President Leacock-Broderick said, “We think sustainable tourism is absolutely necessary if we are to continue to be successful even in the next couple of decades, and more so for 50 years or 100 years.

“Sustainability is multifaceted and is linked to environmental protection and conservation, as well as the creation of career and entrepreneurial opportunities for future generations of Caymanians. It is important to establish pathways right now to ensure we pass on the cultural identity and the economic opportunity in ways that inspires the next generation to be active in tourism while responsibly managing our resources and core values that make the Cayman Islands the wonderful place to live and visit.”

As debates continue over the proposed cruise port, high-rise developments, preserving Cayman’s environment and balancing tourism numbers with the impact on the quality of what the islands have to offer, the question of how much tourism is too much remains unresolved.

“Our real estate industry relies on tourism for business,” said Lund. “We have something very special here. As long as we continue to provide good value through friendliness, safety and quality, there will be a strong foundation for future generations.”

Hernandez said, “What is ultimately important is a clear development plan that takes into consideration what our islands can feasibly support.

“No one wants zero development. What we believe the public wants is to see development with reason, foresight and which is beneficial for Caymanians.

“We are a small island community and our resources are more finite than other nations. We need to be responsible and think ahead.”

Leacock-Broderick noted that the word is out about what attracts people to these islands: “The Caymankind atmosphere is one that is peaceful, friendly and relaxed, yet refined.

“The Cayman Islands Department of Tourism does a great job of being in the forefront of market trends and collaborating with the private sector,” she said. “We believe that this collaboration is an asset to our destination and drives us in the right direction.

“Outside of destination marketing, it is the human capital and talented individuals in our islands that truly act upon that promise of excellence.”

Developer has big plans for the Brac’s tourism product

Imagine peacefully floating hundreds of feet over Cayman Brac in an aerial tram, looking beyond the scenic view of the Bluff and seeing crystal blue water stretching out endlessly in all directions.

After the tram ride around the Bluff, a ferry awaits for a diving trip to Little Cayman. Then, come back to the Brac to eat dinner and say at a five-star hotel.

Brac businessman Mervyn Scott wants to make that imagination a reality.

Scott said he plans on retiring from his position as operations manager of Scott Development at the end of the year. In his retirement, he wants to focus on developing businesses that make the Brac more tourist friendly.

His plans include building an aerial tram around the Bluff and starting a ferry service to Little Cayman.

“My proposal to stimulate economy is to put in the sky crane going along the edge of the Bluff from the western end of the island all the way to the lighthouse down along the north coast,” Scott said.

But the Brac needs more visitors for Scott’s plans to be economically viable. According to statistics from the Ministry of Tourism, the number of Brac visitors was 9,013 in 2015, 9,712 in 2016, and 10,261 in 2018.

To boost those numbers, Scott said some of the territory’s largest investors are seriously discussing the idea of building a cruise pier on the island.

The prospect of a cruise port in the Brac was identified as a goal in the island’s five-year tourism plan, which highlights the potential of upgrading the cargo dock at Creek in the northeastern side of the island to receive small cruise ships and mega-yachts.

“This could relieve some of the cruise ship traffic concentrated on Grand Cayman, and spread the economic benefit of cruise tourism to Cayman Brac,” the plan notes.

Since then, Kirkconnell said further talks have taken place about the possibility of a genuine cruise port on the Brac.

“It was identified in the tourism plan and the discussion is taking place with an operator,” he said.

“We have identified an opportunity for cruise vessels to come to the Brac because of the western route and Cuba opening up a lot of cruise business. I believe the interest is there [for the Brac to be part of that] and we are trying to find out if it is feasible.”

Cruise ships have stopped at the Brac previously, mooring off the Creek dock, but only very occasionally. Kirkconnell said the discussion to create a cruise port in Cayman Brac was entirely separate from the ongoing procurement process for a new port in Grand Cayman. Any such development in the Brac would be on a smaller scale and would depend on the ability to attract enough cruise business to make it worthwhile.

Further, the cruise pier on the Brac would not have the same impact on the environment as a pier on Grand Cayman, according to Scott.

He said because the Brac is right on the edge of the deep waters, no dredging would be necessary. All it would take is extending the “Scott dock” on the north side of the island, he said.

The Department of Environment has not weighed in on this issue, as no formal proposal has been submitted.

“The Department of Environment has not been consulted on a proposed cruise ship pier on Cayman Brac, but if a coastal works application is submitted, then the DoE will be contacted by the Ministry of Environment to provide comments, along with the Department of Planning and the Department of Lands & Survey,” the department stated.

Scott helping develop the island’s tourism product would be a fitting career move for the grandson of Robert Clifton Foster, one of the founding fathers of the Brac’s tourism industry.

Foster built the island’s first hotel, the Buccaneer’s Inn, in 1956, according to Scott. Back then, the island did not have power, and the 10-room hotel – Buccaneer’s Inn – used a generator.

Scott’s family is also connected to the origins of the Divi Tiara Beach resort. He said his father, Capt. Clyde Scott, sold land to a developer for $25,000. Today that land is worth some $25 million and is part of the property of the now defunct Divi Tiara Beach resort.

For years, the Divi Tiara was the centrepiece of the Brac’s tourism product.

When the 71-room Divi Tiara closed in 2006, 37 workers, including 22 Caymanians, lost their jobs. Its owners, the North Carolina-based Divi Resorts, cited economic problems led by insufficient airlift from the US.

“We spent five years nurturing a team in order to create an unbelievable tourist experience,” former resort general manager Max Hillier said at the time. “The resort closing is a major issue. Concern for the future of the staff is what makes it heartbreaking.”

Six of its 12 timeshare units continued to operate.

But after 2008’s Hurricane Paloma badly damaged the resort, the corporation ended all operations, although the group loaned the facility to government to house Brac reconstruction workers in the wake of the storm.

Since then, the site has deteriorated even more, and government has issued multiple orders over the years to the owners requiring them to clean up or face potential fines.

Earlier this year, Scott Development finally demolished what residents had decried as an eyesore for more than a decade.

“The Divi is one of my biggest heartaches,” tour operator Richard ‘Mossy’ Moss said last year, before the site was torn down. “Every time I do a tour pulling out of the Brac Reef, people ask about it. I’m sick and tired of telling that story every day, twice a day.”

Scott said it is his understanding that there is still interest in constructing a new hotel there.

Digital age creates new challenges for criminal investigations and prosecutions

Digital evidence from cameras and smartphones opens up new opportunities to investigate and prosecute crime but also poses new privacy challenges. - Photo: The Washington Post

We leave digital footprints wherever we go. The smartphones we carry are collecting vast amounts of personal and professional information: our close friends and business contacts, our workplace, our daily habits complete with GPS data, the things we search or buy online, emails, text messages and phone records. On top of that, third parties hold additional data from medical records to CCTV video recordings.

The knock-on effect this has for the investigation and prosecution of crime cannot be overstated, says director of public prosecutions Patrick Moran. “It is very hard to imagine a criminal investigation in which digital evidence will not at some stage come into play.”

This does not only concern cyber-crime but also many offences where the crimes are not dependent on but can be proven with digital technology.

With every day that a new app is created to improve the lives of consumers, chances are it will also make the work of criminals easier. At the same time, the opportunities for digital evidence gathering become broader, Moran told a gathering of Caribbean police commissioners in Cayman in May.

Digital forensic lines of inquiry can confirm and rule out suspects. While tech-savvy investigators increase the chances of a successful prosecution, there is also a greater risk of failure at the investigation or prosecution stage, Moran said.

Any deficiencies would almost certainly be exposed during a trial, he noted. Defence lawyers would, for instance, seize on any failure of the investigation to seek digital forensic opportunities to exonerate the defendant.

While the police is always struggling with limited resources to follow a certain line of inquiry, Moran said, resources are a secondary concern for judges and juries when the liberty of suspects is at stake.

“Astute investigators should look for digital evidence to prove guilt or innocence,” he said, adding that prosecutors, in turn, should lobby for legislative change to make it easier for police officers to obtain that evidence.

Donna Babb-Agard, director of public prosecutions in Barbados, agreed that the way electronically stored information is collected and presented in criminal trials may give rise to admissibility issues. How and under what authority evidence is seized, handled, preserved and stored is a major issue for prosecutors to ensure that the evidence has the integrity it needs to be presented in court.

Some of the challenges are inexperienced cyber investigators and judicial officers, the lack of an appropriate legislative framework and delays in granting warrants and production orders, she said.

“It’s always the little things that get the prosecution into trouble,” she added.

Digital evidence will almost always rub against the privacy rights of suspects and any tampering with data, whether deliberately or by accident, will see a case thrown out.

How this data is collected can also impact the victims of crime.

New consent forms for the collection of digital evidence in the UK have come under fire by rape victims over concerns that the practice is disproportionate and could deter victims from reporting sexual assaults.

The new consent forms govern how the police can gain access to personal data such as photos, texts, social media and emails from phones, laptops and other digital devices.

Women’s rights groups fear that complainants who refuse to sign the consent forms, even if they have valid reasons to do so, will see their cases dropped.

Because this information may be disclosed to the prosecution and the defence and ultimately used as evidence in court, the concern is that private information completely unrelated to the case could be used to discredit the complainant.

In these cases, the police and the prosecution must strike the balance between protecting victims, protecting suspects from misguided prosecution and bringing sex offenders to justice.

The UK police has, in response, invited privacy campaigners and rape victims support organisations to help shape the process of collecting digital evidence and the use of consent forms by police and prosecutors.

Despite these hurdles, digital evidence brings a wealth of opportunities to investigate and solve crime. The data stored on smartphones can be part of establishing an alibi or help jog the memory of suspects and witnesses. Even the refusal to grant access to such data can inform an investigation, Moran told the Association of Caribbean Commissioners of Police at the organisation’s 34th annual conference.

Cellphone records, like photos with GPS data, browsing history or messages, as well as third-party number plate recognition on traffic cameras, debit or credit card transactions or CCTV footage, all support the confirmation of a timeline of events and establish the innocence or guilt of suspects.

If at all possible, investigating officers should collect as much digital evidence as possible before an arrest is made, Moran said.

“If it is not possible to find digital footprints before the interview, officers may want to ask the suspect to provide the password to a phone to help prove their innocence,” he said. “The answers to those questions will be revealing, even if it is no comment.”

Moran said the advantage of digital evidence is that it does not rely on a witness’s memory. It stands on its own. But police authorities need to develop a digital strategy for search and seizure and plan how to execute a warrant, what records to obtain and how this seizure could be challenged.

To develop the competencies and technical capabilities to analyse smartphones for instance, money and investments in training are the answers, he said.

“We must redirect financial resources to where it counts, we cannot do business as usual,” added Babb-Agard. “Criminals are not waiting for police officers and prosecutors to catch up.”

Blockchain: Fintech company looks to expand operations to Cayman

Omise Holdings founder and CEO Jun Hasegawa.

Jun Hasegawa, founder and CEO of Omise Holdings’, a Southeast Asian payments provider visited the Cayman Islands in April to explore opportunities to expand the company’s operations.

As the sixth largest financial center in the world, Cayman is potentially an attractive jurisdiction for fintech companies such as Omise, which started as a traditional online and offline payment gateway in  Thailand, Japan and Singapore, and is now building a blockchain-based payment network.

Speaking after his keynote address at GAIMOps Cayman on 29 April, Hasegawa told The Journal that the original idea for blockchain payments stemmed from the difficulties Omise experienced in building the connectivity between financial institutions and its own system. The siloed Southeast Asian banks were simply not moving fast enough.

Omise first considered bitcoin as an alternative. But because bitcoin’s functionality is limited to sending currency from point A to point B, the company became involved in Ethereum to eventually build its Ethereum-based OmiseGO (OMG) network.

“We thought about covering institutions but also the underbanked,” who do not have access to basic financial services such as savings, lending or basic payment methods and who represent 73% of the population in South East Asia, Hasegawa said. “Our company mission is payments for everyone. The answer to that is the blockchain.”

The appetite for blockchain-based solutions in Asia is great because it avoids having to build on top of the existing, hampered banking technology.

Omise says its OMG network is a decentralised public network that can bridge legacy financial systems with blockchain technology to help alleviate performance problems, remove friction and ease capital flow bottlenecks.

“We want to help institutions but also empower the unbanked population with an open financial system to improve quality of life and give more people the opportunity to invest. That is the opportunity we see here in Cayman,” Hasegawa said.

“While on-island, we learned a lot about the local ecosystem, and we were blown away by the island’s calibre of service providers and robust regulatory and compliance framework. We are keen to work with the jurisdiction to set-up a fully-compliant infrastructure that meets Cayman’s globally-recognised compliance standards to support our business objectives.”

OmiseGO is building a global platform for open financial services, which aims to enable transparent, peer-to-peer transactions in real-time and facilitate self-sovereign financial services across geographies, asset classes and applications.

The team also works with companies to form its payment and eWallet strategy, co-create new products and provides consulting services and implementation support. These developments promise to streamline processes like know-your-customer (KYC) and directorship services.

For example, instead of physically stamping the document copy, a notary can use a private key to digitally sign the document and use the intended service provider’s public key to secure and encrypt the document. The intended service provider can then use its private key to decrypt the document while also using the notary’s public key to identify and authenticate that the notary was the true originator of that action.

The company recently incorporated in Malta with the aim of launching its retail digital assets exchange business GO.Exchange from there.

The OMG network is currently undergoing alpha testing and several applications have started to build on top of the network, Hasegawa said. “So, we hope to launch our main network very soon, this year.”

Currently the scaling of the solutions, building the infrastructure and regulation are the main obstacles to a wider adoption of blockchain payments. Omise is working with regulators and governments around the world to help ensure that they are aligned with global regulations. However, Hasegawa said, these barriers will be overcome as the infrastructure continues to scale up.

While offshore centres like Bermuda have taken on the blockchain space with much fanfare and new legislation, Cayman has taken a more measured approach.

So far Cayman is known as a major hub for crypto funds and initial coin offerings, but Hasegawa believes it also has the potential to be an operational base for fintech businesses.

Asked whether Cayman was too late to court blockchain technology companies, the Omise Holdings CEO said: “It is never too late because the blockchain space is only just starting to implement the first solutions. Jurisdictions have a good reason to observe but that does not mean they are late.”

Two years ago, blockchain solutions were unknown in Omise’s home jurisdiction of Thailand. Today the stock exchange is starting to use blockchain on the security side and with cryptocurrency exchanges, Hasegawa said. “In less than two years they are ahead of other jurisdictions in the region. I feel that Cayman has a lot of potential to emulate that.”

Law: Long overdue — Judicial guidance on Cayman’s dangerous dogs

Brett Basdeo

Brett Basdeo, Walkers

The entitlement to own a dog in the Cayman Islands is not absolute. In addition to licensing and registration requirements with the Department of Agriculture, owners are responsible not only for the welfare of their animal, but also for the welfare of others, including other animals, who may come into contact with it. Some contact is inevitable and, while most will be benign, there are some cases that are not. In the latter instances, owners may be subject to both civil and criminal liability for damages or injuries caused, usually determined in the first instance by the magistrates of the Summary Court.

However, while empowered with the jurisdiction to deal with such cases, the decisions of the magistrates, unlike decisions of judges of the Grand Court, are not binding on other magistrates and therefore do not create binding precedent. In the absence of any guidance from the Grand Court, and despite diligent reporting by various news outlets, each decision stands alone and the magistrates are often left to deal with dangerous dog cases in a judicial vacuum.

This has now changed. On 4 Feb. 2019, the Grand Court handed down its judgment in Merren v R.

In the first known decision of its kind in the Cayman Islands, the Grand Court heard an appeal against the order for the destruction of dangerous dogs made by the Summary Court. At issue was the question of whether the court could impose requirements on persons keeping dogs such that the court could be satisfied that the animal would not pose a danger to public safety, as an alternative to the dogs being destroyed.

The provisions of the Animals Law (2015 Revision) relating to dogs considered to be a ‘nuisance’ (trespass and fouling), ‘dangerous’ (apprehension of the spread of disease, injury or damage), or ‘ferocious’ (likelihood of injury or damage) can be described as ‘control’ offences. In each instance, the owner or person in charge of the animal can be charged with an offence which carries a fine and/or imprisonment on conviction, both of which are greatly increased where injury is caused to a person. While the court may impose requirements to be observed in relation to the future keeping of the animal, the court also has the discretion to order its immediate destruction. Unfortunately, such destruction orders are made by reference to the action, or inaction, of the owner, rather than on an examination of the temperament of the animal. As such, a dog’s life can be forfeited because of the owner’s failings. This is especially striking when compared with the position in England where the courts must consider the histories of both the animal and its owner, including the prospects for the animal’s rehabilitation, before making an order for its destruction.

Review of the approaches taken by the magistrates in local dangerous dog cases indicates that the practice of the Summary Court in relation to destruction orders can vary greatly. While this may be understandable due to the lack of precedent, it is nevertheless unsatisfactory as too wide a range in the exercise of the court’s discretion can lead to injustice and to negative perception by the public. Unfortunately, due to differences in statutory language, English authorities and sentencing guidelines, which in other circumstances are persuasive and typically followed by the courts in the Cayman Islands, were of limited assistance in the Merren case.

The underlying facts in Merren related to an all too common occurrence where the owner’s four dogs were not kept within a suitable enclosure and were free to roam. An altercation between the owner and his neighbours led to a fight between the dogs in which the neighbours and their dog were bitten while on their own property. The presiding magistrate described the incident as one of the most serious cases of failing to keep dogs under proper control that she had seen and proceeded to make orders for the immediate destruction of the owner’s four dogs. The owner appealed the destruction orders.

Acting Justice Stephen Hellman of the Grand Court, who had the opportunity to consider the lack of equivalence between English and Cayman Islands statutory regimes, heard the appeal. The judge identified that, despite the absence of statutory authority to make orders for suspended destruction (i.e., where the dog is destroyed only if the owner fails to keep it under control) and the benefit that such alternative sentencing might provide, questions of policy raised in English cases were, as a matter of justice and common sense, equally applicable in the Cayman Islands.

Following analysis, Justice Hellman held that before making a destruction order the court must first ask itself whether any measure short of a destruction order was sufficient to safeguard the public. In doing so, the judge arguably installed an important, and humane, filter on the exercise of the court’s discretion. In responding to the question, owners, or the legal practitioners representing them, have been afforded the additional opportunity to persuade the court to save the animal, divorced from repercussions of the owner’s previous conduct.

Having identified suitably practical and alternative measures which could be, and had been, taken, which included the use of secured enclosures, muzzles and controlling the number of animals that could be led by a single person when in public, the judge in Merren accepted submissions that he was bound to quash the destruction orders. The dogs, which had been impounded with the Department of Agriculture for close to a year while awaiting the appeal, were ordered to be returned to their owner.

The Luxuries in Life

If you feel like treating yourself, or you just happen to have extra thousands of dollars burning a hole in your pocket, you might want to consider a little luxury. Whether it is a possession or experience, these items certainly fall into that category.

VIP experiences

When you want great seats to a concert or a show, you can usually get them through ticket brokers or ticket websites. You’ll pay a premium, but spitting distance from Beyoncé may just be worth it. However, there are other experiences so rare and unique, that you’ll need to bring your fairy godmother into the mix or simply visit www.charitybuzz.com. The website that raises funds for a whole mix of charities has got some serious pull when it comes to donated magical moments, such as lunch with your favourite celebrity, a walk-on part in a Broadway show, or VIP tickets plus a backstage tour of none other than ‘Saturday Night Live’. If you’ve got the dosh, they’ve got the dreams. Browse for rare gift items, extraordinary travel experiences, and maybe even tea with Robert De Niro.

Heli-diving (sort of)

Snow skiing aficionados know that one of the most luxurious excursions for the suited-and-booted is a heli-skiing trip. Terms like “fresh powder” are whispered in chalets, along with the promise of empty runs barely touched by other humans. Here in Cayman, scuba divers can go “heli-diving”, if they so desire. Cayman Helicopters offers a day’s trip that includes scuba in all three islands, with even a stop for lunch thrown in. The day begins with a leisurely flight to Cayman Brac so guests can dive the Capt. Keith Tibbetts, then it’s on to Little Cayman for a look at world-famous Bloody Bay Wall, followed by a delightful repast at the Southern Cross Club. Once the last bite has been consumed, it’s all aboard to head back to Grand Cayman for a final descent to visit the Kittiwake wreck. The copter can comfortably seat five. You are welcome to have fewer in your party, but the price remains the same. You board it, you bought it. (Note: You are not jumping in the water directly from the chopper, unless you are Chef José Andrés).

Luxury staycations

Yes, you can book a room at The Ritz-Carlton for the weekend, but if you want to get together with friends and family in style, why not rent a villa for the week or weekend? Treasure Cove in Cayman Kai is a beautiful property overlooking a tranquil cove and boasting so many bedrooms, it could be the setting for an Agatha Christie novel (in a good way). From the professional chef’s dream kitchen to the master bedroom that would give any Presidential Suite a run for its money, this villa is the ultimate getaway. Take a dip in the pool, lounge on the beach, or take one of the complimentary kayaks around the point to Rum Point where creamy mudslides await. Minimum stay periods usually apply, but who wants to restrict their time anyway? A weekend really isn’t long enough to truly appreciate all that this, and other short-term rental villas have to offer.

Drive like a boss

A trip to any big city means entertainment, shopping and taking drives along exciting thoroughfares. When travelling with the family, a car, SUV or minivan is probably the rule of thumb. However, if you are going solo or duo and have some money to burn, you could treat yourself to a luxury sports car rental. Believe it or not, in locales such as Miami, Las Vegas, Los Angeles and New York (where the parking alone could break the bank), you can hire everything from a high-end Mercedes to storied names like Maserati, Lamborghini, Bentley and Ferrari. Expect to pay anything between $500 and $3,500 per day for the privilege for the rental, and this probably isn’t the time to pooh-pooh the insurance, unless you have a double black American Express card. Want to drive down the strip in style? No one has to know it isn’t yours.

Elevated kitchens

Even if you don’t know how to boil an egg, you can have a kitchen that makes you look like an expert … or at least encourages you to learn the art of cooking. When the basic appliances just won’t do, you need to get yourself a Gaggenau. Steam ovens, coffee machines, cooktops, refrigerators, wine cabinets … the German company produces them all and more, with the kind of handcrafted excellence that will have your guests eschewing the Picasso in the living room for the shiny stovetop in the heart of the house. Never seen your reflection in a Gaggenau before? Luckily, Bon Vivant in Camana Bay can show you some examples, up close and personal. Before you know it, you’ll be opening a pop-up restaurant in your home. No less than three Michelin-starred chef Daniel Humm has partnered with the company in the past for a rare, interactive dining experience. You know what they say, if it’s good enough for Humm…

Extraordinary cocktails

If you are going to imbibe, should you not seek out a cocktail created with quality ingredients? Long gone are the days of the simple Cuba libre (rum and coke) or screwdriver (vodka and orange juice). These days, if you are going to work at any kind of half-decent watering hole, you had better know your Baileys from your Beefeater. The Ritz-Carlton, Grand Cayman has elevated its cocktail menu in Silver Palm Lounge to new heights, with libations categorised by four distinct regions: America, Africa, Asia and Europe. The names of the drinks are as exotic as their recipes. Guests can indulge in the Hakuna Matata, Nashi Spritz and Princess Elena, to name a few. The Smoke and Mirrors cocktail, hailing from Asia, is a heady mix of Hojicha smoked scotch, ginger, yuzu and grapefruit, whereas the Cayman Old Fashioned incorporates a house rum blend, brown sugar, Angostura bitters and orange. Attention to detail includes specific glassware to make each cocktail a feast for the senses.

Must-have smartphone

Just like money, people may soon prefer the phone that folds when Samsung releases its Galaxy Fold. The articulated spine, when flexed, reveals a 7.3-inch Dynamic AMOLED display and there are six pro-grade cameras integral to the device. The advantage of the fold design means it can be thin enough to fit in pockets, yet opens to a screen size only slightly smaller than the Apple iPad Mini. It is all very exciting although when exactly the phone will be available to the general public is a whole ‘nother question. It was supposed to launch in April this year but has been delayed to fix some issues. Best guess right now is July, so tech lovers will have to wait a little longer to get their hands on one. Based on early press, it does have its cons, and the sticker price will come in around $2,000, but such new technology will be tough to resist. How will Apple respond?

Cryptocurrencies: Crypto hedge funds attracted new money despite bitcoin losses in 2018

Crypto hedge funds managed to grow their assets under management threefold in 2018 despite the difficult market conditions last year.

A report by PwC and Elwood Asset Management based on the 100 largest crypto hedge funds shows that as the price of bitcoin slumped by 72% last year the median crypto hedge fund lost 46%.

Median assets under management grew from $1.2 million in January 2018 to $4.3 million in the first quarter of 2019.

The average crypto fund had assets of $21.9 million with fewer than 10% of funds managing more than $50 million and more than 60% managing less than $10 million.

According to the report, there are currently only around 150 active crypto hedge funds which manage approximately $1 billion of assets, but this figure excludes index funds and venture capitalists.

Reflecting the relative youth of the sector, most crypto fund managers have comparatively little investment management experience of only three to four years on average.

In addition, a mere 25%  of crypto hedge funds’ boards include independent directors.

The lack of proper governance structures makes it unlikely that institutional investors will invest in many of the crypto funds. “Having independent directors on the board of the fund is seen as an accepted fund expense. We expect crypto hedge funds to focus increasingly on fund governance as they look to raise capital from institutional investors,” the report said.

Institutional investors may also have reservations about the fact that just more than half of funds (52%) use an independent custodian.

Although custody is not as straightforward in the crypto space as with traditional funds, for which the use of independent custodian is the norm, there are hacking risks and regulatory concerns over managers holding client assets.

“Many crypto fund managers often use multi-signatory wallets, hot/cold wallet set-ups or other innovative ways to hold the private keys of the fund’s crypto assets,” the report said, adding that funds opting for a self-custody approach, must have the necessary inhouse tech and cyber expertise to design and monitor the self-custody set-up.

Investors will also expect to receive a monthly net asset value that is verified by an independent, reputable fund administrator. There is currently only a limited number of fund administrators servicing the crypto space and “being able to accurately value a crypto fund remains challenging”, the study said.

However, this is expected to change as the industry matures and established players become more comfortable with crypto assets.

Henri Arslanian, PwC Global Crypto Leader, said the crypto hedge fund industry today is where the traditional hedge fund industry was in the early 1990s. “We expect the industry to go through a rapid period of institutionalisation and implementation of sound practices over the coming years.”

The report’s authors expect many more ‘traditional’ asset management professionals to join crypto hedge funds in the short- and medium term.

Three quarters of funds analysed in the report can take short positions but only one third of funds uses leverage as part of their investment mandate. The report also found that most crypto managers shun third-party research with only 7% using it to inform investment decisions.

Bin Ren, CEO of Elwood, noted that the crypto hedge fund space is just one part of a much broader ecosystem of digital assets, around which there is increasing evidence of institutionalisation. “This broader interest from investors and regulators is undoubtedly a positive step towards digital assets being recognised as an asset class with true viability and longevity. However, in order for that progress to continue it needs to be accompanied by greater transparency and education, and this report is a step towards achieving that.”

More than half of the analysed crypto funds (55%) are domiciled in Cayman, followed by the US (17%) and the BVI (13%). Not surprisingly most of the fund management companies are based in the US (64%), with Cayman in second place (20%), ahead of Singapore (5%).

However, the location of the fund manager is misleading. While the investment manager that legally contracted with the fund may be located in an offshore jurisdiction, like Cayman, the team is often physically located in an onshore jurisdiction like Singapore or Hong Kong, the report said.

In terms of fees, the study found that the average fees for crypto hedge funds last year were 1.72% management fee and 23.5% performance fee.

Globalisation: The shifting sands of the global economy

Nicholas Rilley, Butterfield

In an age of on-demand media, flashing stock market tickers and minute-by-minute market commentary, it is easy to forget that real shifts in underlying economies happen at a comparatively much slower pace. Business cycle analysis is a common way to think about investment and based on general market commentary we seem to have been in the latter stages of the current cycle for a number of years now.

Broadly speaking, financial and labour market indicators suggest that we are very late cycle, but real economic indicators are much more varied. In addition to this shorter cycle analysis, there are important overarching longer-term structural shifts that often present evolving challenges for both market participants and policymakers.

The three most important changes have been: a shift away from manufacturing towards services in developed markets, globalisation and financialisation. Over the last three decades, economic cycles have been longer, flatter and shallower than they had been previously and the changing structure of the US economy helps to explain why. The shift from goods and manufacturing to services was a key driver of the ‘great moderation’ thesis, which ended abruptly with the financial crisis. However, even including the impact of this period, the volatility of both growth and inflation has fallen substantially.

Manufacturing has been declining as a share of the economy since the late 1960s and goods-producing industries are generally less volatile than services-oriented businesses. However, other factors such as better inventory management, partly driven by technology, and global supply chains have allowed the manufacturing sector to operate in a much more efficient manner.

A good example of this was that the downturn in the US energy sector in 2014/2015 did not cause an economywide recession. What we saw was a classic capital expenditure-led boom-bust cycle that ended abruptly when oil prices fell. These imbalances and capital misallocations tend to cause slowdowns or recessions, however the strength of other sectors such as healthcare and software, increased the overall resiliency of the economy.

Since 2016, the evolution of globalisation has been covered extensively, with the tension between the US and China a key focal point. It is difficult to overstate the extent to which globalisation has allowed businesses to arbitrage the costs of labour and capital globally. The two most prominent beneficiaries of globalisation have been multinational corporations and the emerging market middle classes, particularly in China.

Financialisation has been the process by which financial institutions and markets have increased in size and influence. The rise of shadow banking peaked in the US in 2008, but since then much of the credit creation globally has taken place in China. Credit creation outside of the traditional banking sector was a major contributor to the US housing crisis. Our understanding since then has evolved, with much written about how loans create deposits, rather than the other way around and the importance of the eurodollar system.

Of the three structural shifts, the one most at risk is globalisation. In absolute terms there are no winners from deglobalisation and from an investment perspective the risk to profit margins is very real. However, deglobalisation is probably too strong, as supply chains will ultimately adapt to the changing environment, although this will take time and cost money.

Globalisation has challenged the conventional economic thinking with regards to the relationship between employment, wages and inflation. Benefits have accrued to capital owners and the flexibility afforded to business has put downward pressure on inflation. Output gaps need to be considered in a global context and are also harder to measure in a service driven economy. Jerome Powell has even gone as far as saying that too-low inflation is ‘one of the major challenges of our time’.

Financialisation is probably the most challenging, because it is less of a mechanical process and the challenge is one of reflexivity. For example, central banks respond to changes in financial conditions, but financial conditions are influenced by central bank policy, particularly various forms of forward guidance.

Last year provided a good example of how essential it is to understand these shifts. As China tightened credit conditions, we saw manufacturing-oriented countries outside of the US with exposure to China suffer. With US interest rates on the rise, this put upward pressure on the US dollar and tightened financial conditions in the US. Weaker financial markets were an important factor in disappointing first quarter consumption, which ultimately caused the Fed to pivot significantly more dovish.

Sources: Bernstein Research, TS Lombard

Disclaimer: The views expressed are the opinions of the writer and while believed reliable may differ from the views of Butterfield Bank (Cayman) Limited. The Bank accepts no liability for errors or actions taken on the basis of this information.

Life’s little luxuries

Appleton Estate Jamaica Independence Reserve Rum

The Appleton Estate Jamaica Independence Reserve Rum was officially launched in August 2012, with all the pomp and circumstance befitting one of the oldest rums in the world. Sold by only a handful of specialist retailers, it is presented in a crystal decanter, produced by Glencairn Crystal of the United Kingdom and designed after the curvaceous shape of other Appleton vessels.

The brass and cork stopper is finished in gold, and gold screen printing on the bottle reflects a host of national symbols of Jamaica. The rum is presented in a black lacquered gift box with gold-finished brass hinges. It contains a commemorative booklet that outlines Jamaica’s march to Independence and the journey of the 50-year-old rum. There are only 800 bottles worldwide, and Cayman has a handful of them for sale. This would be quite the addition to the liquor cabinet, but if you can’t splash out on the full monty, you’ll find the sublime amber liquid at fine bars on the island.

If you feel like treating yourself, or you just happen to have extra thousands of dollars burning a hole in your pocket, you might want to consider a little luxury. Whether it is a possession or experience, these items certainly fall into that category.

Ulysse Nardin Marine Mega Yacht

When it comes to collectors’ watches, Ulysse Nardin is a name well recognised among aficionados. Designs start in the mid-four figure range … and then there is the Marine Mega Yacht. This new addition to the family was revealed in Miami on the same weekend as the International Boat Show and Watches & Wonders Miami, which makes sense when one witnesses the propeller, anchor and tide marker on the face. If that all sounds a little nuts by description, you’ll probably change your mind when you see it. Designed with the mega yacht owner in mind (which makes sense, considering its $310,000 price tag), this timepiece has all the features necessary to get you out of a nautical jam while keeping you effortlessly stylish. The boggling 504 components and unique functions will only be enjoyed by 30 owners around the world, thanks to ‘Limited Edition’ being taken to a whole new level. But then, that’s what Ulysse Nardin does best.

2020 Mercedes GLE 450/GLC 300 Coupe

There is nothing like that new car smell, particularly when it is Eau de Mercedes-Benz. It is already that time of year when the latest, shiny new models are ready to hit the market, and these two are doozies.

The GLE 450 SUV will make you eager to be carpool designated driver with its ability to seat seven, giving you the chance to show off the high-tech, luxury interior built for comfort. Its digital instrument cluster, coupled with an LED high performance lighting system and the Mercedes-Benz User Experience (MBUX) are just a few of the features that make this a very desirable vehicle. Prepare to relish being stuck in traffic.

The GLC 300 Coupe has gone through a redesign, boasting an updated exterior and new infotainment features. This model, too, has the MBUX interface with a voice control system that springs to life when drivers hail it with “Hey Mercedes.” This is an altogether more tactile machine, with its inviting touchscreen panel and upholstery options; it just begs to be bought in fire engine red.

Loving Louis Vuitton

Here’s a tip: If you love your Louis, wait until you are next in London to shop. Britain’s capital is arguably the least expensive place in the world to buy LV (unless you count the back of a van) and don’t worry if you miss out in the city – Heathrow Airport is home to world-class shopping, with LV stores in Terminals 3, 4 and 5.

Louis Vuitton’s iconic logo can be found on everything from handbags, belts and scarves to jewellery, perfumes and shoes. Your purchase won’t just be plonked into a bag; there are usually boxes, dust covers and a glass of Champagne to celebrate your latest acquisition. It is a religious experience. Want to keep your leather bags looking good at home? Get products from professional company Lovin My Bag in the U.S. and keep the Armor All under the sink. Visit www.lovinmybags.co.

Montegrappa ‘Game of Thrones’ collection

Yes, it’s a little fanboy, but when a ‘Game of Thrones’ pen is made by Italian company Montegrappa, you sit up and take notice. Founded in 1912, Montegrappa has created writing instruments to be held in the hands of some of the world’s most famous people, from royalty to celebrities and writers such as Ernest Hemingway. Of course, it doesn’t get much more royal than those families seeking the Iron Throne in HBO’s smash hit series, based on the books of George R.R. Martin. There are four designs in the collection, each bearing the emblem of the four houses: Baratheon (stag), Targaryen (dragon), Lannister (lion) and Stark (direwolf). They are available as fountain pens, rollerballs and ballpoints, but surely a fountain pen has to be the weapon of choice when signing that important contract or a declaration of war. As the Montegrappa website says, the pens are “Forged for the feudal”.

Hasselblad X1D

The Hasselblad name is revered in the photography world. The Swedish camera manufacturer was no less than the first company to have a camera on the moon. You could say its products are literally out of this world. To the layman, the prices may seem eye-watering, but the results speak for themselves. If large, heavy equipment first comes to mind – the likes of which would be lugged on expeditions to the far flung corners of the world – take a look at the Hasselblad X1D-50c. At less than half the weight of a conventional digital medium format camera, the mirrorless X1D-50c is a game changer in the world of photography. The 50MP CMOS sensor captures fine details with true natural colours and the camera also has a built-in video feature; your footage never had it so good. Unlike many other Hasselblad models, you’ll find the X1D starting at under $10,000. Yes, there are many lenses and other goodies that will nicely rack up your bill, but the images are priceless.

Cruising the Greek Isles

When sailing with such storied names as Celebrity, Princess and Norwegian becomes so very last season, it might be time to up the ante and charter a yacht for yourself and some very lucky guests. You don’t have to start with a vessel rivalling those owned by Russian oligarchs – there is a range of options to choose from, including sailboats, entry level motor yachts and catamarans before you go big or go home. Companies like Istion Luxury Yachts offer destinations such as the Cyclades, the Ionian Islands, Croatia and Montenegro – glorious places with breathtaking views and all with an itinerary pace set by you. The crew takes care of everything, including meals, so you just have to sit back and relax. Summer is a great time for cruising – it can’t hurt to look at what’s available. A week’s cruise starts around €10,000 for 4 to 6 people. Tip: Always get a clear picture of what is included in the price. Many companies quote fuel, food and gratuities as being additional.

Clash de Cartier

Cartier has a new collection of rings, bracelets, earrings and necklaces dubbed Clash de Cartier, sure to make a splash on the runway. Fashioned from pink gold, with or without diamonds, the designs are simple yet edgy. There is also a yellow gold and coral ring with matching bracelet, offering a different twist on the theme. Those familiar with Cartier will recognise the telling features such as the studs and beads that can be found in other collections, yet Clash de Cartier certainly stands alone with a unique look and charm all its own. If you feel like making a statement, this is the collection for you. Thankfully, there is no question of anything Cartier retaining its value; just watch the ‘Antiques Roadshow’.

Critical evaluation prompts renewed anti-money laundering push

As money laundering investigations involving illicit funds from Eastern Europe are expanded to banks in several European countries, including Sweden’s Swedbank, Cayman is grappling with the findings of the Caribbean Financial Action Task Force’s evaluation of its anti-money laundering regime. - Photo: Bloomberg

It had been Cayman’s worst kept secret for months. When the Caribbean Financial Action Task Force eventually published its evaluation of the islands’ anti-money laundering regime in March, few were surprised by the criticism.

After all, not all the planned legislative and regulatory changes had taken effect by the time the CFATF inspection took place in December 2017. The extent of the criticism raised a few eyebrows, however.

Given that the focus of the evaluation was on the practical effectiveness of the anti-money laundering framework, it was not astonishing that the evaluation identified gaps resulting from the late implementation of laws and supervisory functions.

But some industry professionals noted that it was surprising how the report made very technical findings, for example, about the wording of Cayman’s Anti-Money Laundering Regulations.

Others said the reports criticism was warranted in some areas but not universally.

“The findings seem a bit harsh in some areas but fair in others,” said Paul Byles, director of FTS, a regulatory and management consulting firm.

The relatively lower compliance ratings for awareness of terrorism financing and proliferation financing, for instance, seemed “harsh”, he said, given the typical inclusion of those topics in many local anti-money laundering and countering terrorism financing seminars.

The report implied that the size of Cayman’s banking sector, based on assets and liabilities reported to the Bank of International Settlements, demanded a more extensive risk assessment.

This was equally “harsh”, Byles said, because the majority of these assets relate to interbank activity, mostly with banks regulated in equivalent jurisdictions, rather than transactions between banks and their customers.

On the other hand, the national risk assessment was criticised for essentially not going far enough in certain areas. “And some sectors, which are relatively newly regulated were found to require additional training or supervision, which was a fair finding,” the compliance consultant added.

The CFATF report laid some blame on the national risk assessment, conducted in 2015, stating that, it had not focused enough on international money laundering and terrorism financing threats in light of Cayman’s role as an international financial centre.

The national risk assessment responds to the first of 40 Financial Action Task Force recommendations, which states countries should identify and analyse the risks they face from money laundering and terrorist financing and take action to mitigate them.

The assessment is the foundation for a risk-based approach that ensures mitigation and prevention measures are appropriate.

Industry insiders said much work was done to conduct the national risk assessment exercise using the World Bank methodology, but the main problem was that it was not published in a meaningful or helpful way.

Another circular problem with the exercise was the lack of data, largely due to gaps in supervision that could have informed the risk assessment. The risk assessment was needed to determine the supervisory approach, but this required data, which could only result from the supervision of industry participants.

The global standard-setting body in anti-money laundering found that the risk assessment provided a “fair level” of understanding but criticised that it did not contain an assessment of legal persons or arrangements.

Byles said the risk assessment was “not that far off”. Traditionally, Cayman’s approach had been to subject entities carrying out relevant financial business to the country’s anti-money laundering regime.

“This does not necessarily include all legal persons as many won’t be carrying out any relevant financial business at all,” he said. “Obviously, if this is what is now required as part of a more comprehensive risk assessment methodology, we now need to assess the implications and do what’s required to ensure that we comply with any global standards being applied to such entities, if such a standard exists.”

Lack of investigations and prosecutions

A common issue highlighted by the assessments of anti-money laundering regimes in other jurisdictions, as well as Cayman, is the lack of criminal investigations and prosecutions in the space.

If money laundering offences are investigated or prosecuted, it almost always involves minor domestic predicate offences, the report found. As a result, the assets that are seized in these cases are “modest” and there could be greater use of civil forfeiture, the CFATF concluded.

Despite the resources available to the Royal Cayman Islands Police Service (RCIPS) and the Office of the Director of Public Prosecutions, “large and complex financial investigations and prosecutions have not been identified, or pursued, and there is limited focus on stand-alone [money laundering] cases and foreign generated predicate offences”, the report said, adding that there remain fundamental challenges in how the jurisdiction identifies instances of money laundering and terrorism financing for investigation.

Responding to the CFATF findings, the Office of the Director of Public Prosecutions said, “Cayman is becoming more proactive in monitoring activity relating to financial crime and, in particular, the development of intelligence that can lead to more effective investigations and prosecutions.”

There are a number of investigative agencies involved in this process, including the RCIPS, which is now working with the City of London’s Economic Crime Unit to further strengthen its ability to handle complex investigations.

“The ODPP will imminently be appointing an additional specialist prosecutor, in order to ensure that appropriate advice and assistance is provided to investigators as and when required, and to assist with the conduct of subsequent court proceedings,” the statement said. “Complementing this initiative, further specialist training programmes will be provided to prosecutors and investigators, in co-ordination with the Financial Reporting Agency and the Financial Crimes Unit of the RCIPS.”

The RCIPS, in a statement, equally emphasised that greater proactive monitoring of signs of money laundering is required, as well as developing these indicators into useful intelligence that can lead to stronger investigations and prosecutions.

“Cayman is already taking steps to further ensure effective AML monitoring, and this includes the partnership between the City of London’s Economic Crime Unit and the RCIPS.”

In April, two Economic Crime Unit experts visited Grand Cayman to assess the RCIPS’s approach to complex international money laundering and terrorist financing investigations, and to help develop the local capacity for these investigations.

“ECU secondments are also under discussion, and the secondments would assist with the RCIPS’s investigative capacity,” the police said.

Fines

While industry practitioners said they are seeing a keen approach by CIMA to enforce provisions in the anti-money laundering guidance, the potential for that to succeed in a prosecution is very low.

Because many firms are challenging CIMA’s findings using legal advisors, the main source of cases for prosecutions is reduced.

The regulator’s administrative fines regime was meant to supplement the prosecution process. However, in contrast to the United States where regulatory fines become public, CIMA does not need to publish details of the fines it imposes under the law.

How many fines CIMA has imposed is not clear but some practitioners argue that more fines may have been able to demonstrate effectiveness more readily, despite the lack of prosecutions.

Financial Reporting Authority

The Financial Reporting Authority, which is Cayman’s financial intelligence unit responsible for analysing suspicious activity reports and providing information to local and international law enforcement also received significant CFATF criticism.

Cayman’s evaluation report said the authority does not have the tools to assist investigative authorities in the identification of cases, nor does it have access to wider relevant information.

As a result, disclosures by the Financial Reporting Authority are hardly used to supplement initiate or supplement investigations.

Earlier this year, Financial Reporting Authority Director Robert Berry told the Public Accounts Committee that his department needed more staff. The authority received 938 suspicious activity reports last year – about a 50% increase over the 601 reports it received in the previous year – and the backlog of cases that had not been dealt with is growing.

The Cayman Islands government responded to the report’s finding by appointing a dedicated task force, made up of the premier, the attorney general, the deputy governor, and the ministers for financial services, commerce and finance, to oversee the implementation of a “comprehensive action plan”.

The task force will coordinate the implementation of the plan and lead the several initiatives with the aim of remedying the identified shortcomings within a year.

“The Cayman Islands remain fully committed to upholding the highest global standards on money laundering and terrorist financing,” Premier Alden McLaughlin said. “Our anti-money laundering and counter-financial terrorism action plan will send a clear signal that we intend to maintain those standards.”

“Work is already underway to improve information gathering, more rigorously monitor financial activity and enhance enforcement including the confiscation of assets,” he added.

Supervision

Some of the measures focus on plugging supervisory gaps.

Earlier this month the Department of Commerce and Investment introduced four new board policies to establish more effective anti-money laundering regulation as the de facto supervisor of designated non-financial businesses and professions, which include real estate agents and precious metal dealers.

Other supervisory authorities to introduce changes are CIMA and the Legal Practitioners Association, with the legal profession becoming subject to further supervision.

The Cayman Islands Institute of Professional Accountants became AML supervisory authority for accounting firms in December 2017. As such, it is tasked with registering all accounting firms, monitoring for compliance, and issuing guidance, directives and procedures.

Any firm that provides accounting services, including bookkeeping, payroll, accounts preparation, tax advisory or tax compliance services must register with the Cayman Islands Institute of Professional Accountants by May 30.

Complying with CFATF standards will cost Cayman millions

After the Caribbean Financial Action Task Force released its scathing report in March on the shortcomings in Cayman’s anti-money laundering and counter-terrorist financing regimes, government officials promised a “comprehensive action plan” to address the shortcomings and avoid having the territory placed on a CFATF grey list.

Some of the changes entail tweaking Cayman’s rules to have more information on the companies that do business here, and to more easily process that information.

For example, last November legislators amended the Proceeds of Crime Law to give more independence and autonomy to the Financial Reporting Authority, removing the requirement for it to get consent from the attorney general before fulfilling international information requests. Attorney General Samuel Bulgin explained at the time that the amendment was required by the Financial Action Task Force, which wanted Cayman to provide more autonomy to its Financial Reporting Authority.

But most of the changes will require more law enforcement focus on high-profile money laundering cases, more law enforcement officers and other government officials, and more training for those officers.

This will require millions of dollars in extra spending.

Estimates have not been publicly made about how much CFATF-mandated reforms will cost the private sector, but the figure may stretch into the millions. For example, the territory has more than 10,000 registered funds, and all funds must now have anti-money laundering officers.

The CFATF reforms will also cost the public sector millions of dollars. During Finance Committee proceedings in April, Premier Alden McLaughlin said his administration is prepared to spend “many of millions of dollars” to make sure Cayman can comply with international anti-money laundering standards.

“We have gotten quite an unfavourable report from the CFATF, so we are working across the full range of entities and agencies that are required to have those systems in place to improve them,” McLaughlin explained during the proceedings. “We have been placed in an observation period, have one year to get our systems up to satisfactory standard. If we don’t, we will be moved from observation status to a grey list – and then it gets worse from that.”

The premier proposed spending increases in multiple government departments at the Finance Committee hearings to bolster their anti-money laundering regimes. He asked legislators to approve about $4.7 million in extra spending, including $610,000 of extra spending for the Border Control Services, $3 million for the Cayman Islands Monetary Authority, $266,000 for the Department of Commerce and Investment, $228,000 for advice to the Attorney General’s Office and Cabinet, $374,000 for financial intelligence services, and $189,000 for law enforcement agencies.

When a legislator asked him about the first proposed appropriation of $610,000 for the Border Control Services, McLaughlin said the money would be largely spent towards hiring extra compliance officers and training for them. He added that he would be making many more requests for extra funding for anti-money laundering controls throughout that day’s Finance Committee hearings.

“Throughout the [supplemental appropriations] paper, we will see some significant increases for many of the entities that have any interface at all with the anti-money laundering CFT issues,” he said. “The government is committed to spending many millions of dollars, quite frankly, to bolster that regime and the vast majority of this allocation is relating to that.”

McLaughlin did not go into detail about the other appropriations, but the supplemental appropriation report contains notes about what each appropriation will be used for.

The $266,000 supplemental appropriation for the Department of Commerce and Investment is earmarked to “implement recommendations included in the AML/CFT plan.” This likely includes money to fund the department’s supervision of non-financial businesses such as real estate companies and jewellery stores. These types of businesses never had a government agency to report anti-money laundering information to until March 2017, when the Department of Commerce and Investment was made their regulator.

Now that the department is regulating designated non-financial businesses for the purposes of anti-money laundering, the department has to send officers on regular inspections to check whether those businesses have proper prevention measures in place.

The department also had to draft a handbook and hold regular workshops for businesses to comply with the territory’s regulations.

The $3 million appropriation for CIMA will likely be used, at least in part, to hire more regulators. The supplemental appropriation report only states the money will be used “to support the cost of additional requirements” for anti-money laundering regulation, but McLaughlin has mentioned the need for additional CIMA officers to help make Cayman compliant with the CFATF standards.

The supplemental appropriation report has more details about the $228,000 appropriation for the Attorney General’s Office and Cabinet and the $374,000 appropriation for financial intelligence services.

According to the report, the $228,000 will go towards “policy advice to the Attorney General [to] oversee and coordinate the development of integrated policies and their implementation through the Anti-Money Laundering Steering Group).” This includes drafting guidance for Cayman to respond to international anti-money laundering developments, and preparing initial drafts of Cabinet papers and notes for the attorney general’s review on such matters.

The $374,000 for financial intelligence services will, in part, provide more resources for the Financial Reporting Authority to deal with a growing backlog of suspicious activity reports. Financial Reporting Authority Director Robert Berry told the Public Accounts Committee in February that his department received 938 suspicious activity reports last year – about a 50-percent increase over the 601 reports it received in 2016/17, which itself was a near record.

Berry told the Public Accounts Committee that he needs additional resources to deal with the growing backlog.

“We’ve recently undertaken assessment of our resource needs, including both human and physical capital – IT infrastructure – and concluded we don’t have the necessary resources to meet mandate in terms of timeliness,” he said at the time. “We’ve prepared a paper for the chief officer and AG to seek supplemental funding this year for additional staff.”

The $189,000 for law enforcement is earmarked for the “provision of prosecution services relating to criminal matters, International Legal Cooperation Activities, and “Justice Protection Law Activities.”

Pursuing more prosecutions for high-profile money laundering cases was one of the primary standards the CFATF wants Cayman to follow.

Although money laundering offences are investigated and prosecuted, this involved almost exclusively minor domestic predicate offences. Given the shortcomings of national risk assessment, the CFATF report noted, this “may not be fully commensurate with [Cayman’s] risk profile.”

Wealth distribution: OECD says middle class is getting squeezed

It is a common parental promise and expectation that the next generation will be able to lead a better, richer and easier life. And while this has been true for decades since World War II, the past 20 to 30 years have been different. Millions in industrialised countries have come to realise that their wealth is stagnating.

Those born after 1983 are much less likely to be part of the middle class than previous generations, mainly because the middle class has shrunk in most OECD countries, research by the Organisation for Economic Cooperation and Development has found.

While almost 70% of baby boomers were part of middle-income households in their twenties, the OECD found only 60% of millennials are considered to be part of that demographic today. The report defines middle class as the group earning between 75% and 200% of the median national income.

The group’s study, which notes a squeezed middle class that is under pressure, is the latest piece of research that finds an increasingly unequal wealth distribution with the top 10% in the income distribution holding almost half of the total wealth, while the bottom 40% accounts for only 3%.

The effect of this is a higher economic vulnerability and lower social mobility for a larger group of people.

With few exceptions, middle class incomes in OECD countries are barely higher today than they were 10 years ago, increasing by just 0.3% per year. (This is a third less than the average income growth of the richest 10%.)

The dismal income growth, and stagnation in some countries, has been widely blamed for the perception that the current economic system is inherently unfair and that the middle class has not sufficiently benefited from economic growth relative to its contribution.

Because living costs are rising faster than incomes, indebtedness is a growing problem.

House prices have been growing three times faster than household median income over the last two decades. And housing generally takes up one third of the disposable income compared to only a quarter in the 1990s.

As a result, more than a fifth of middle-income households spend more than they earn.

“Today the middle class looks increasingly like a boat in rocky waters,” said OECD Secretary-General Angel Gurría, who launched the report last month in New York together with Luis Felipe Lopéz-Calva, assistant secretary general of the United Nations Development Programme.

“Governments must listen to people’s concerns and protect and promote middle class living standards. This will help drive economic inclusive and sustainable growth and create a more cohesive and stable social fabric,” Gurria said.

A comprehensive action plan is needed to support the middle class, the OECD said, recommending governments should improve access to high-quality public services and ensure better social protection coverage.

To tackle cost of living issues, policies should encourage the supply of affordable housing.

In addition, targeted grants, financial support for loans and tax relief for home buyers would help lower middle-income households.

In countries where the levels of housing-related debt are acute, mortgage relief would help overburdened households get back on track.

Gabriela Ramos, the OECD Chief of Staff who oversees the organisation’s work on inclusive growth, said the analysis delivers a bleak picture and a call for action. “The middle class is at the core of a cohesive, thriving society. We need to address their concerns regarding living costs, fairness and uncertainty.”

Amid the stagnation in wealth, labour market prospects have become increasingly uncertain: one in six middle-income workers are in jobs that are at high risk of automation, compared to one in five low-income and one in 10 high-income workers.

To counter the threat of temporary and unstable jobs with lower wages replacing traditional middle-class jobs, the OECD said, more investments are needed in vocational education and training.

Social insurance and collective bargaining coverage for non-standard workers, such as part-time or temporary employees or self-employed, should be extended, the report stated.

In creating a fairer socio-economic system, the necessary changes will have to extend to tax policy, the OECD noted.

The organisation advised policy-makers to consider shifting the tax burden from labour income to income from capital and capital gains, property and inheritance.

Transportation: Traffic initiatives planned for Cayman

In the coming two-year period, the East-West Arterial will be extended to alleviate congestion in a similar way the Esterley Tibbetts Highway extension, above, achieved it for the traffic to and from West Bay.

The current debate about traffic congestion on Grand Cayman has brought about all kinds of hypothetical solutions. From limiting the number of vehicles on island and bridges across the North Sound to elevated or overseas highways, and new forms of public transport, MLAs and political hopefuls are outdoing each other with sometimes outlandish ideas to placate an electorate that is stuck in gridlock traffic at peak hours from as early as 6 a.m. in the morning, in particular from the eastern districts, at the bottle neck around Grand Harbour and in South Sound.

A surprisingly cash-rich government, after several budget surpluses, has now promised to take action.

New roads

Although extensions of the Esterley Tibbetts and Linford Pierson Highways are complete, increases in capacity have barely kept up with the growth in traffic. “In some cases, problems are just getting worse,” Premier Alden McLaughlin admitted in the Legislative Assembly during the presentation of government Strategic Policy Statement earlier last month.

In response, government will bring forward long-term road improvement and spending plans to address the traffic congestion along the main east-west routes, especially east of Grand Harbour.

In the coming two-year period, the East-West Arterial will be extended first through to Northward and then on to Bodden Town at a cost of about $18 million.

While this is absolutely crucial in solving the problems, it will not be sufficient, the premier said. “Accordingly, we are also reprioritising the rest of the highways’ programme to include projects around Grand Harbour and westward into George Town to ensure traffic can move more smoothly.”

The measures are expected to reduce congestion, shorten travel times and improve accessibility between George Town and the eastern districts.

However, road-building alone will not solve Cayman’s long-term traffic problems.

Public transport

McLaughlin said all the evidence suggests that, sooner or later, the roads will just become congested again as the population continues to grow. It was therefore important to investigate alternative solutions for sustainable transport.

In a first step, government will commission a mass transportation study to analyse available options and what is needed to develop a viable public transport system.

“In anticipating tomorrow’s problems, we must deliver alternative solutions,” he said. “These include safer cycling and walking routes, but I also believe a radical new approach to public transport is necessary.”

The study is expected to be completed within a year.

Speaking during a parliamentary debate about traffic solutions in April, Transport Minister Joseph Hew said Cayman will have to adopt alternative means of mass transportation and address the issue holistically.

“We must look at things such as hop-on and hop-off buses along the Seven Mile corridor and also into George Town. We must start considering things like airport park-and-rides and downtown park-and-rides, water taxis, and an airport express from the hotels running on a regular basis.”

Key elements of the George Town revitalisation project also would include parking, and a hop-on and hop-off transit system, perhaps in combination with a park-and-ride.

‘Complete streets’

In order to promote walking and cycling, new roads will have to be designed with a stronger focus on safety. To this end, the National Roads Authority has adopted the concept of ‘complete streets’ as its standard for future roads.

The transport minister explained that complete streets are designed and operated to enable safe access for all users, including pedestrians, cyclists, motorists and transit riders of all ages and abilities.

The wider, more spacious design will make it easier to cross the street or to cycle to work.

In George Town, where a lack of street lights has been identified as one of the issues, pathways with lighting, as well as safety and security features, will give pedestrians more confidence to walk around town or to access some of the planned parking areas.

Environmental benefits

To make transport more sustainable, government has set itself targets in implementing the National Energy Policy between 2017 and 2035.

Hew said the government is working on increased incentives for compact electric vehicles, hybrid cars and smaller engine, low CC (cubic centimetre) motorbikes and electric bikes.

Government also committed to converting 7-10% of government vehicles to electric or hybrid within the first five years.

“I can tell you that we are well on our way to achieving that and we have been installing charging stations around the government buildings and agencies that will be purchasing these vehicles, and vehicles have already begun to be integrated into the government fleet,” Hew said.

These plans were not the complete solution, the minister conceded, but essential pieces of a wider approach to reducing traffic and Cayman’s carbon footprint.

What’s new in transportation?

Boston Whaler's such as the Dauntless 240 and especially the 270 Vantage are popular choice in Cayman.

As new development and upgraded infrastructure continue to improve Grand Cayman, in particular, transportation services are upping their game as well.

A host of high-end services, some of them quite new, are available to residents and visitors alike.

Here’s a look at what’s new in transportation:

On the road

SUVs are increasingly becoming the car of choice on island, according to Chad Phillipps, brand manager at Mercedes-Benz (Car City) on Industrial Way.  The showroom, under new ownership, opened five years ago, and Phillipps said demand has been pretty steady.

“SUVs are really doing well – this is a general thing on island,” he said. “It’s the combination of the utility of the SUV, which can carry more passengers than a car, and can handle the road conditions, like the extra ground clearance when rain accumulates on the road.”

“The bottom line,” he said, “is it’s just a fabulous vehicle, well outfitted and with top of the line safety features.”

SUVs are included in the full line of Audi models in stock at the Audi Cayman Islands showroom on Market Street in Camana Bay. Since becoming an Audi importer more than 10 years ago, “we have had a welcoming response on the island”, said marketing manager Michelle A. Hydes.

“We have created relationships with our customers that go beyond the sale of one car. … Audi owners are part of an elite group that are included in premier events, such as Cayman Cookout [and] the Hedge Funds Care gala,” among others, she added.

For those who just want an Audi to cruise around in temporarily, an Audi A5 convertible is available from Hertz car rentals in Grand Cayman.

Meanwhile, electric cars continue to grow in popularity on island, particularly with the addition of Teslas a few years ago. John Felder, CEO of Cayman Automotive, introduced electric vehicles on island in 2009. Since then, Teslas have been added, as well as a lithium battery electric scooter.

For those who are not in the market for a vehicle, there are other options to private ownership.

A new car sharing service is underway for those who live and work in Camana Bay.  The service, called ZÜN, uses a fleet of Audi A3 Sportbacks.  Developed by Arch Automotive in partnership with Dart Labs, the service provides rental cars by the hour, day or week. A mobile app allowing 24-hour access launched in mid-April.

Private cars for hire are also available, primarily for airport transportation, but also for tours, charters and attractions. New to the space is Royal Limo.

“We launched in December after noticing room in the market for a luxury transfer service from the hotels on Seven Mile Beach,” said sales and marketing manager Chance Skauge. “We operate at the Kimpton, Ritz and Marriott with the Hertz brand. This is something that had been thought about for a while, but the timing seemed right this year.”

Skauge said the service has definitely been busy, with the 2019 Chevy Suburban the customer favourite among the fleet of three black cars.

Majestic Tours, meanwhile, has been in operation since 1985, and now counts a fleet of coaches, vans, an SUV and a BMW 7 Series, as well as a wheelchair-accessible van. Airport transportation and private car hire are available.

For those who prefer a different kind of ride, there is Cayman Custom Cycles on Dorcy Place in the Industrial Park. Tour the island on a Harley, or get your own bike customised or restored. Owner Keith Keller also offers motorcycle instruction.

On the water

Many people prefer taking to the water versus the open road, and there is no lack of yacht and boat sales and charters on Grand Cayman.

Harbour House Marina on Marina Drive sells Boston Whalers and Sea Rays, but the most popular choice by far is the Boston Whaler 270 Vantage, said assistant general manager Al Parsons. With its comfortable ride, a bathroom on board and a fair amount of shade, it’s the perfect cruising boat, he noted. Plus, it’s also suited for a day of fishing out in the ocean.

Speaking of Sea Rays, luxury charters are available through several companies on island. Cayman Luxury Charters, with an office on Market Street in Camana Bay, features the Elusion 42-foot Sea Ray 420 Sundancer, the Sea Star 40-foot Sea Ray 40DA Sundancer and the Evasion 29-foot Sea Ray 290 Sun Sport.

Cayman Yacht Charters at the Cayman Yacht Club has an array of choices as well, including a 31-foot Twin Vee Center Console luxury catamaran, a Sea Ray 46-foot Sundancer, and the Sea Ray SLX 310, a brand new luxury sport boat with a retractable roof, among other amenities.

In the air

For the ultimate get-away-from-it-all ride, private jet service is available from Grand Cayman’s Owen Roberts International Airport.

Priority One Jets, an online booking service, has charters has access to some 7,000 aircraft worldwide and can arrange flights from Grand Cayman within a few hours. Jet charters, air charter and jet rentals are available for personal or corporate use.

At PrivateFly, another booking platform for on-demand service, charter jets are typically requested and flown by private individuals, said Nicole Wilke, the company’s US marketing manager.

“We act as a broker for private jet charter flights, so we do not directly employ any crew or pilots,” she said. “Not many operators are based [in Grand Cayman], so for a flight originating in Grand Cayman, an aircraft and crew would need to reposition from their home base to the island first.”

“Our technology platform enables us to find private jets that will be either on the island or nearby for the requested date,” she added.

She noted a recent trend – that clients are combining business trips with a few days of leisure – “and this is particularly true around the Cayman Islands.”

The size of aircraft depends on customer preference and number of passengers, she said.

And here’s where Cayman’s upgraded infrastructure comes into play.

“Luckily,” she said, “the runway at Grand Cayman International is long enough to accommodate all types of private aircraft.”

Insurance: Drones, imaging tech could save insurers millions after hurricanes

Saxon technology manager Mitchel Wright uses a drone to assess a Cayman property. - Photo: Provided by Saxon

Sitting at his desk on the second floor of the Saxon Centre on Eastern Avenue, Saxon technology manager Mitchel Wright pulled up a digital image of the Newlands area on his computer.

“See those green dots?” he asked. “Every dot represents a block and parcel number of a home we insure.”

Wright then pulled up images of a specific Cayman home – one photo taken by drone in 2017 and another last June. Suddenly, he noticed a difference between the two images.

“You just made me realise that building was not there in 2017, and now it’s here in this photo,” he said, pointing to a structure that looked like a shed in the back of the person’s property. “This person is insured with us, but we have to tell her you have an add-on because she’s underinsured. I swear I just saw this now.”

Without Saxon’s aerial imaging abilities, this change Wright spotted on the property may never have been identified. In the event of property damage, the owner would be at risk of receiving on a fraction of her claim due to being uninsured.

But examples like these only scratch the surface of the benefits that aerial photography and imaging technology can offer, according to Mitchel.

For the purposes of the insurance industry in Cayman, this technology will be most useful in the event of a major hurricane or other natural disaster.

When a disaster like 2004’s Hurricane Ivan strikes, it can take months for insurance companies to process the hundreds of claims rolling in.

For starters, Wright said, companies have to import dozens of loss adjusters to evaluate the claims. They do so by inspecting each home to assess the value of the property damaged.

Saxon CEO Brian Williams said his company sent someone to the Bahamas a few years ago to see how loss adjusters were faring in the wake of a hurricane there. With street signs and other landmarks down or destroyed, the adjusters struggled to find their way around the islands, said Williams.

“Some adjusters would take a day to evaluate a single property,” he said.

Loss adjusters also face health risks when they, for example, climb onto a roof to measure it in the wake of damage.

These difficulties and hazards will be mitigated, if not eliminated altogether, with the use of Saxon’s technology, said Wright.

Instead of relying on a loss adjuster to physically inspect a damaged property, Saxon will already have a digital image stored in a cloud database. That image is not a simple photograph, but a three-dimensional rendering that contains information about all the image’s relevant metrics – things like the spatial dimensions of the home, as well as how much plywood, shingles, and other materials are used. The software Saxon uses also has the information of how much all that material costs.

A loss adjuster operating remotely is able to use that image and information to process a claim offshore. So, if someone in Cayman has their roof destroyed, the offshore loss adjuster can view an image of the roof remotely to assess exactly how much the property owner’s claim should be settled for.

This means claims could be processed in days instead of months in the wake of a hurricane, according to Wright. Saxon could also save millions if it were able to process its claims remotely rather than having to import loss adjusters, who may charge 100% of a claim’s value, said Wright.

“If we have a $100,000 claim, an adjuster will charge the insurance company $200,000,” he said. “So why do we want to wait for a public adjuster to get involved? One claim could pay for this entire programme.”

The ease in which drones allow Saxon to capture images of clients’ property can be applied on a much larger scale, Wright added.

The Saxon technology manager estimated that it would take three drone pilots only five days to map the entirety of Cayman. This could save government hundreds of thousands of dollars by not having to pay a surveyor to fly a plane over the islands to map them. It would also allow government to frequently update its survey maps of the territory, which would allow it to keep up with Cayman’s rapid development.

According to Saxon, the company is one of the only insurers in the Western hemisphere to be investing so heavily in aerial imaging technology as a claims-processing strategy. The technology has not caught on in other Caribbean jurisdictions, and many US insurers are hesitant to navigate the complex Federal Aviation Administration regulations about commercial drone operations there.

Wright, who has a degree in computer science, has been a drone enthusiast for years, having built his one aerial vehicle before they were widely available to purchase from store shelves. About two years ago, he moved from former Saxon parent company DMS to head up a new subsidiary created by Saxon: Drone Works.

Williams and Saxon CFO Nick Brierly joked that Wright uses Drone Works as his own private playground, but they said, in reality, he is conducting research and development that will only increase in value as the technology takes off.

Even though Saxon is making money and is well positioned in the local property insurance market, the company is investing to position itself for the future, said Brierly.

“The time to invest is when times are good,” he said. “If you wait until a hurricane, suddenly you don’t have the money.”

“This isn’t a one-off,” Brierly added, referencing Saxon’s investment in drones and imaging technology.

“We want to get to a point where we don’t even have to fly in loss adjusters after a hurricane. So the day after a storm, we have someone offshore who’s looking through the stuff and settling claims in days and not months.”

Cayman continues to refine and enhance its Trusts Law

Robert Mack

On March 8, 2019, the Legislative Assembly approved a broad series of enhancements to the Trusts Law of the Cayman Islands as described in the Trusts (Amendment) Bill, 2019. While some of the enhancements are highly technical in nature, there are four key changes to be aware of.

Statutory ‘Hastings-Bass’

The courts of the Cayman Islands now have statutory powers to rectify mistakes in relation to the exercise of fiduciary powers where:

  1. The person who exercised the power (typically a trustee) failed to take into account one or more considerations that were relevant to the exercise of the power; or
  2. Where such person took into account one or more considerations that were irrelevant to the exercise of the power; and
  3. But for acting the way they did in the light of these relevant considerations the power holder would not have exercised the relevant power at all, or would have exercised it on a different occasion or in a different way.

Such a procedure is typically deployed by trustees where an unforeseen onshore tax consequence has arisen as a direct result of the exercise, or rather mis-exercise, of a fiduciary power. It is useful where the effect of the exercise of the power is not what was expected. It can be viewed as a ‘get out of jail free card’ as it allows trustees and other power holders to reverse what might otherwise be very negative and unintended outcomes. Although the Cayman Islands courts have applied Hastings-Bass principles in the past, the fact that the principle is now codified should provide an extra layer of comfort to every holder of a fiduciary power.

Variation of trusts by the Cayman court

The Cayman Islands courts have long held statutory powers to vary the terms of Cayman Islands trusts provided the circumstances were right, however, for such applications to be successful, it had to be shown that such variation(s) would be for the ‘benefit’ of the beneficiaries who were unable to speak up for themselves – typically minor beneficiaries and beneficiaries who have yet to be born.

To put this into context, many trust instruments are drafted in such a way to benefit a large group of family members over long periods of time. As such, it is possible, and very common, for some of the beneficiaries to be under the age of majority, in the womb, or not yet born.

In such circumstances where a trust variation is ongoing, separate legal counsel will usually be appointed to represent this group.

Since many trust variations are necessary to create family harmony, settle some dispute, or achieve some form of onshore tax advantage(s), these would often be viewed as a ‘benefit’ to the minor and unborn beneficiaries, but in some cases it may be difficult to locate a ‘benefit’ at all as some trust variations are neutral in effect, and, as a result, lawyers had to get creative in order to make their applications successful. The term ‘benefit’ in this context is not limited to financial benefits, but may also include wider social benefits, such as achieving family harmony.

The recent change now only requires that such variation(s) are not to the ‘detriment’ of such persons.

Compromise of trust litigation

As with the variation of trusts, the endorsement by the Cayman Islands courts to compromise or settle trust litigation no longer requires the presence of any ‘benefit’ but rather the ‘no detriment’ test is also to be applied in relation to beneficiaries even in circumstances where there is clearly no ‘benefit’ present. This is certainty helpful in a litigation context as the settlement of litigation inevitably requires some ‘give and take’ and it is often the case that the only benefit to be had is the extinction of protracted and expensive litigation.

Firewall ‘beefed up’

The so-called ‘firewall’ provisions of the Trusts Law, which are the provisions which seek to repel claims which attack the validity of a Cayman Islands trust (and Foundation Companies) on the basis that its creation did not conform to or offended some provision of foreign law, have been enhanced by expanding the class of persons offered protection from such claims.

Previously, this group included individuals who have a “personal relationship with the settlor” (whether by way of blood or marriage) but now includes “any beneficiary (whether discretionary or not)”. The end result is that the revised Trusts Law now provides enhanced protection from such attacks.

Conclusion

Whilst there are some other minor amendments not discussed, such as the inclusion of controlled subsidiaries and private trust companies in the definition of ‘trust corporations’, these points are really left for the trust nerds amongst us to ponder.

Otherwise, all of the refinements should be welcomed by practitioners, fiduciaries, and beneficiaries alike and will certainty keep the Cayman Islands on the cutting edge of progressive trust jurisdictions worldwide.

Robert Mack is head of Private Client and Trusts at law firm HSM.

Tax: Economic substance in Cayman — ‘I know it when I see it’

Nick Joseph
Nick Joseph

Nick Joseph and Peter de Vere

I know it when I see it.” With those words Justice Potter Stuart, in the United States Supreme Court, unravelled the most Gordian of knots, with the most Gordian of ease. He was called upon to define that which commentators what was potentially undefinable – what constituted “obscene” in the context of hard-core pornography. Not an easy task for any judge, particularly one in the United States in 1964, but that was his solution. It was beautiful, and simple, and for many, at least for a while, it worked.

The Tax Cooperation (Economic Substance) Law has created a similar dilemma. It requires legal practitioners to advise, and government officials to determine, whether or not an entity is a relevant entity, and if is a relevant entity, whether or not it is carrying out a relevant activity.

What is and what is not a relevant entity can be readily determined on a case-by-case basis, as can a determination as to what constitutes a relevant activity. For those interested, these may include banking business, distribution and service centre business, finance and leasing business, headquarters business, fund management business, holding company business, insurance business, intellectual property business, and shipping business (all defined). It expressly does not include investment fund business.

Any relevant entity carrying on a relevant activity is generally required to satisfy ‘the Economic Substance Test’. That test is satisfied if the relevant entity conducts Cayman Islands core income generating activities in relation to the relevant activity, is directed and managed in an appropriate manner in the islands in relation to that relevant activity; and has an adequate number of full-time employees or other personnel with appropriate qualifications in the Islands.

Whilst the Law is vague as to what constitutes ‘adequate’ and ‘appropriate’, it itself defers to Guidance Notes as to the meaning of those words for the purposes of the Law.

The problem that confronted authors of those Guidance Notes, and must now confront Cayman legal advisors and the Tax Information Authority is uncannily very similar to that which confronted Justice Potter. They may similarly have been expected to define the undefinable. When requiring an entity to demonstrate ‘adequate’ and ‘appropriate’ mean in the context of physical presence, we could regret that lack of specificity in any guidance (though I would think us wrong to do so). Instead we should take a lesson from the US Supreme Court. We will know it when we see it.

Whether the Economic Substance is adequate or appropriate should be obvious, and if it is ever not, the Cayman courts may be asked to sort it out.

Until then, we must know it when we see it. Affected businesses will be advised to employ people, rent premises, spend money and hold meetings here, all to the level they think appropriate to meet the expectations of the legislation. Real estate agents, IT service providers, contractors, restauranteurs and indeed most existing businesses and individuals in the Cayman Islands should probably be delighted. That the core activity is actually being carried out in the Islands should be readily apparent.

Of course, issues will develop. William T. Goldberg described that “I know it when I see it” can be “paraphrased and unpacked as: ‘I know it when I see it, and someone else will know it when they see it, but what they see and what they know may or may not be what I see and what I know, and that’s okay.’”

For now, we should see opportunity, for our islands and our customers, and know it for what it is. That’s okay.

Immigration regime is a trump card

The idea that a business should have a physical presence in order to claim that it has its seat of operations in a particular jurisdiction is not new. The brass nameplate era, exacerbated by the virtual presence age, has been the subject of chagrin from many western leaders. These criticisms date from well before President Obama found fit to comment on the size of a particular office building in George Town housing some 12,000 companies (and omitted to note the fact of a much smaller building in Delaware (1209 North Orange Street) housing many more companies. Indeed, as Cayman’s companies registry has grown to more than 100,000 companies in the intervening decade, 1209 North Orange Street was recently reported as having some 300,000 companies registered there, three times the number of companies registered at every office building and residential home in the Cayman Islands combined.

Whatever the arguments, the tide has shifted. We can lament the apparent passing of a golden age, and dwell on the hypocrisy of foreign politicians, or look forward with excitement to the opportunities this changing current brings.

All change brings challenge and even fear. That latter sentiment often proves baseless (albeit too often with 20:20 hindsight). Yes, we are going to lose some business, including perhaps to 1209 North Orange Street, but these changes will also affect key competitors, including the BVI and Bermuda. With a level playing field (at least against those jurisdictions) Cayman’s size, depth and range of world class financial services industry professionals, sets us apart.

However, we also have an ace up our sleeve –  our immigration regime.

Although frustrating to many, and even confounding to some, most aspects of our immigration regime work well. It does something that other territories fail at. It asks if a local person stands ready to fill a role at an appropriate standard and if not, subject to sensible checks as to such things as health and character, the permit is yours. Yes, there is a price to pay and other cost associated with administration, but the government is actively working to streamline processes. What is more, with a relatively nominal express fee paid, a work permit can be available in less than 72 hours. Where the business is international in nature and does not compete locally, the answer is not only yes, but often enthusiastically so.

We are also fundamentally very good at assimilating large numbers of foreign nationals into our community, allowing them to advance towards becoming Caymanian, and even encourage them to purchase (or build) their own homes here.

These are not optimistic statements as to how the Cayman Islands will address the challenge of foreign executives wishing to move here. This is a statement of what has pertained for decades. Anyone contemplating such a move can ask one of the numerous executives who have already, before there was any Economic Substance Test, established their mind management and control firmly on our soil. Their experience has overwhelmingly been positive. As a new generation of executives arrive, perhaps in significantly increasing number, they will do so under a tried and tested system. The opportunities for the Caymanian people will be many. The real challenge will be ensuring that they participate as fully as they should for many years to come.

Nick Joseph is a partner and Peter de Vere is head of Corporate and Commercial at law firm HSM.

Interest Rates: Don’t fight the Fed

Monique Frederick, Butterfield

In the current economic environment, in which the Federal Reserve has put a rate-hike campaign on hold and is set to end balance sheet reduction, citing increased risks to US economic growth, risk assets should outperform.

We finished 2018 with a depressing final quarter as all risk assets, corporate debt included, suffered losses nearly erasing all gains achieved in the first nine months of the year. Blame for this fourth quarter market downturn has been directed at the Fed, which maintained a hawkish stance and raised interest rates for the fourth time in 2018.

The Fed increased the target range for its benchmark interest rate by 25 basis points to a new band of 2.25% to 2.5%, putting the Fed funds rate at its highest level since the spring of 2008. This decision was taken despite signals of an impending global economic slowdown.

In contrast to the final quarter of last year, 2019 is off to a great start with the S&P 500 executing a perfect V-shaped bounce by returning over 13% in the first quarter, compared to the 13% decline which was witnessed in the fourth quarter. This was notably the best quarterly return for this broad US index since the third quarter of 2009, which saw a 15%+ total return. More impressive is the fact that this broad-based recovery has brought global markets in striking distance of all-time highs.

Contrary to this positive market performance, the International Monetary Fund cut its outlook for global growth to the lowest level since the financial crisis, amid a bleaker outlook in most major advanced economies and signs that higher tariffs are weighing on trade. The organisation in now anticipating 3.3% global growth for the year, down from the 3.5% forecast published in January. Against this backdrop of slower growth, what then has propelled markets?

The Fed dramatically changed its tone, from first projecting two rate hikes in 2019 to forecasting none at all.

Admittedly, the Fed is not the only central bank which has turned dovish; the European Central Bank and China’s central bank have also taken steps to stimulate their economies. The pivot to an accommodative stance undoubtedly affects interest rate-sensitive industries with the most interest rate-sensitive sector – housing – leading the way.

As a result of the Fed suspending its rate-hiking trajectory, mortgage rates are set to remain at current levels, resulting in a much better scenario for consumers than initially anticipated.

In 2018, US housing was a source of weakness as the rise in mortgage rates negatively impacted home sales and residential investments. Although March 2019 existing home sales disappointed, declining 4.9%, new home sales hit a 16-month high, increasing by 4.5% on an annual basis.

This recent housing data, does not necessarily suggest a major up-turn, but it does suggest some improvement in the housing sector. As the main driver of overall consumption, consumer spending, which represents 70% of GDP, is a key factor in determining the overall state of the economy.

Given that consumers’ greatest expense relates to housing, whether through ownership or renting, any positive trends in the housing market will positively affect consumer spending.

Additionally, household debt levels have come off their highs and the labour market has remained very resilient, with the level of jobs openings at a record high and initial unemployment claims at a 49-year low. With wages rising, households now have more income, leaving the US consumer in fairly good shape.

The current earnings season has also been a source of optimism as a surprising number of companies are beating earnings expectations.

According to FactSet, more than 75% of S&P 500 companies which have reported first quarter results have exceeded analysts’ expectations. Reports like these quell any fears of an earnings recession in the US and sets aside concerns of a global slowdown.

Of course, we should not just view the markets through rose-coloured glasses by ignoring the various risks which still remain. Geopolitical risks, including the US-China trade dispute and Brexit, have the ability to shave off some of the spectacular market returns achieved to date. However, in the meantime, as long as the Fed refrains from hiking interest rates, going against the Fed could result in leaving some profits on the table.

Disclaimer: The views expressed are the opinions of the writer and, whilst believed reliable, may differ from the views of Butterfield Bank (Cayman) Limited. The Bank accepts no liability for errors or actions taken on the basis of this information.

Financial Services: How cryptography unlocks next generation financial services

Brian Tang

Brandon Caruana, Brian Tang

While we may not realise it, cryptography has been a part of our everyday life for the last decade – from our Facebook password to our Netflix account details – and now it is changing how people go about their financial business.

As the financial services industry starts to replace the services offered by traditional financial services providers (FSPs) with applications that help both businesses and individuals to be more time- and cost-efficient, to be more in control and, above all, more secure. In this article we explain how cryptography is helping corporations and consumers alike do business – and why the leading innovators in the trillion-dollar financial technology space are looking to the Cayman Islands for support.

Cryptography started as a means to secure communication across time and distance. Scrambling letters using a pattern or according to a predetermined value (for instance A becomes C, B becomes D, C becomes E and so on) prevented messengers or other parties delivering the message from being able to decipher the content. Securing communications against unintended recipients has been an ongoing ambition since humans first started communicating.

In today’s always connected, information-based world, securing communication has evolved to a fundamental truth: data is the new gold, (i.e., value) and cryptography is the new Fort Knox (i.e., secure infrastructure). Creating and distributing value is the engine of the global economy, and cryptography has evolved to keep pace with this electronic-based economic model. When you can be 100% assured that information has not been altered, that an entity is what it says it is, that a contract will execute when information is valid, that it can be verifiable that an entity has control over what they represent to have (assets, contracts or authority), you can build an absolute trusted chain of events that builds on top of each other without the need for trusted or semi-trusted third-party intermediaries.

As the sixth largest financial centre in the world, and a leading jurisdiction for financial services, the Cayman Islands cannot ignore the evolution that is occurring right before our eyes. The development and adoption process of new technologies may seem slow and gradual, but the transformation occurs overnight. The jurisdiction must understand the transformative potential of the new application of cryptography, have an open mindset, and be at the forefront of its implementation.

The key to cryptography

Public key cryptography consists of a public key, a private key, and one or more transmitted messages. An oversimplified analogy would be that your Facebook account profile is your public key (open for everyone to see), your password is your private key (only known to you), and Facebook posts are your securely transmitted messages (only performed by you to others). Other Facebook users can validate that you made those posts because only you have your password (private key), and those users can also read your posts by logging into Facebook with their own account profile (public key) and password (private key).

In the world of financial services, public key cryptography has the potential to create a more efficient and verifiable data transmission platform. Let’s begin with the Know Your Client (KYC) process, where FSPs must validate the identity of a potential client. Currently, regulation in the Cayman Islands requires that the clients bring in the identification documentation for verification firsthand or provide a certified true copy from a qualified certifier or notary. For clients living abroad, the second method is the only reasonable option and these clients need to have a notary or equivalent endorse that the copy of the original document is a true copy of the original document. That document will then need to be sent to the Cayman Islands’ FSP.

The next generation of financial services

This process can be significantly streamlined using public key cryptography. Instead of physically stamping the document copy, a notary can use their private key to digitally sign the document and use the intended FSP’s public key to secure and encrypt the document. The intended FSP will then use its private key to decrypt the document while also using the notary’s public key to identify and authenticate that the notary was the true originator of that action.

Another practical example is obtaining the signature of appropriate directors for a resolution. Using public key cryptography, each director has their own unique combination of public and private key and use their private key to digitally sign resolutions. The director then secures and encrypts the content of the signed resolution using the intended recipient’s public key. Once received, the intended recipient: (i) uses their own private key to view and decrypt the resolution’s content; and (ii) uses the director’s public key identify and validate that the message was sent by that director or signatory.

Public key cryptography ensures that the confidential communication between the sender and the recipient is secure. Because the public key is mathematically derived from the private key (but not vice versa), public key cryptography creates a trust system that validates that a signature or message has not been altered or modified and preserves that the sender and intended recipient are the true authorities over the message.

Brandon Caruana

The way we do business is already changing

While cryptography began as the foundation for secure transmission of simple messages, communication now encompasses a large number of use cases and the potential possibilities are much greater: validate identity; validate ownership; prove provenance; assign digital rights; provide a better financial system; securely store data in the public domain; enable e-commerce; protect assets; enable privacy; or prove a truth with zero knowledge about the underlying data.

The list of potential current and future use cases can be a bit overwhelming at first glance, but rest assured cryptography is not mysterious magic that is too complicated to understand. In fact, quite the opposite is true, as the field has been thoroughly researched and based on sound and proven mathematics. The entire global economy is fully dependent on its deployment across countries, products, and services. However, instead of separate processes and forums (and account names and passwords) for Facebook, notarising documents, and signing resolutions, imagine one holistic network to access and perform all these actions. This would fundamentally change the way value transfer occurs. Cryptography ultimately has the ability to create trust among geographically dispersed and unrelated parties. The bedrock of financial services is that although Alice doesn’t know or trust Bob, Alice trusts Bank 123 and Bob trusts Bank 123. Bank 123 then provides a means for Alice and Bob to exchange services and value by trusting a connected intermediary. The application of a network that relies on cryptography and promotes security can now create trust between Alice and Bob because both parties trust cryptography and the network without relying on a sequential relay of intermediaries that only trust each other.

Cayman’s future as an innovation island

As this application of cryptography continues to gain momentum, businesses will be attracted to locations where the jurisdictional onboarding process – incorporating an entity, conducting resolutions, opening bank accounts and appointing service providers – offers the path of least resistance. Financial centres with burdensome procedures, checklist-type approaches that mitigate illogical risks, and outdated technologies will be left behind. Cryptographically secure networks streamline the above process globally.

Exploration and experimentation continue as fast, scalable direct Alice-to-Bob solutions are being developed. Financial institutions must embrace these developments and potential networks as long-term partners and not as adversaries. Open discussions should be had to discuss the possibilities and collaboration should be explored to integrate these new technologies locally.

Leading fintech companies such as Omise Holdings, already recognise the attractiveness of the Cayman Islands and understand that the jurisdiction has the ingredients necessary to support the next fintech unicorns (billion-dollar companies). Jun Hasegawa, founder and CEO of Omise Holdings, the leading online payment provider in Asia, recently spoke on the real-life applications of blockchain in GAIMOps Cayman’s keynote interview, as the company looks to the Cayman Islands for its next major operational hub.

The Cayman Islands is a well-developed Caribbean nation, offers first-class professional services, and is home to more than $2 trillion in institutional capital. Let’s work together to attract these companies and adopt these solutions; otherwise, we may be left behind as the world rejects jurisdictional onboarding and instead onboards itself to the global network.

Brandon Caruana and Brian Tang are the co-founders of Cartan Group LLC, a Cayman Islands-based management consulting firm.

Cayman’s property market: ‘Don’t call it a boom’

Dart’s plans to erect an ‘iconic tower’ at Camana Bay as part of a $1.5 billion investment should be separated from a general debate about increased building heights, speakers at the Royal Institution of Chartered Surveyors conference argued.

Cayman’s real estate market is thriving by any measure. Total property sales reached a record $800 million last year, an 18 percent increase over 2017. The number of property transfers, at 1,857 transactions, was 9 percent higher year on year. Construction activity, meanwhile, continues unabated all over the island.

The March conference of the Royal Institution of Chartered Surveyors in Cayman showed that the situation is a cause for optimism for developers and realtors alike.

For most of the speakers at the event, the current market is simply a natural progression from previous years.

Matthew Wight, managing director of NCB Group, said Cayman already had “a fantastic year” in 2017, following four years of consistent growth. The 2018 figures are even higher, he said, “which points to it being the greatest real estate market that we have seen in Cayman”.

Realtor Tony Catalanotto projects this trend into the future and believes the current development and sales activity is sustainable rather than just the sharp end of a boom-and-bust cycle.

“It seems that we are seeing a spike, but I think it is just the natural evolution of more people coming to the island,” he said. “I don’t like to use the word boom, because this suggests that things are going to come tumbling down. I think it has been steady sustainable growth. The market has caught up; the strength in the global economy has been helping us.”

Liam Day, the managing director of property and development consultancy BCQS International, noted that current market activity must be considered in the context of the economic crisis that started in 2008. It took three to four years to overcome the impact on prices and get back to pre-recession levels, Day said. “When some people say the market is overheated, I think it is overheated when you look at the past three or four years. But if you see the last 15 years that growth is more measured.”

Still, even from a planning approval perspective the level of development appears unusually high.

Director of Planning, Haroon Pandohie, said “the conversion rate from what gets planning permission to what comes out of the ground has been tremendous”.

At times, it may seem the department is struggling to keep up, but developers are also ready to go. From the point when an application seeking planning permission is made, Pandohie said, developers have the shovels ready to go into the ground.

Speaking at an RICS conference panel last month were, from left, Matthew Wight, Liam Day, Haroon Pandohie, Tony Catalanotto, Amanda Bodden and Cline Glidden.

Growth drivers

Whether it is a boom or not, there are several reasons for the record activity.

Cayman’s population has grown to more than 65,000, the highest ever. The strength of the global and local economy has boosted confidence, which ultimately translates into higher sales and more new builds.

The two pillars of the economy, financial services and tourism, are booming. Conference speakers also lauded political stability and a “fiscally responsible and pro-development” government that grants concessions and has reduced fees.

The lack of capital gains and property taxes means that Cayman is still an attractive investment opportunity in a stable and relatively crime-free community, argued some.

For Amanda Bodden, senior personal lending manager at Butterfield, the biggest driver of the growth in the real estate market is immigration: “Our immigration system is tried and tested and working to the point where it is allowing for greater confidence when making long-term plans.”

The healthy risk appetite among the local banks is also supporting the development. The competition in loan origination is indicative of customers being able to negotiate with multiple banks, she said.

“We are all ready and willing to lend. I don’t think we would have been able to see this record high property market last year if there wasn’t easy access to credit. If you look at some of the advertising coming out of the banks, you get the clear picture that we are all quite aggressively seeking market share and focus on loan growth,” Bodden said. “I don’t see that changing in the near future.”

In addition, the speakers in a market update panel highlighted that Cayman had received a significant push from another factor: the Dart Group.

NCB’s Wight said, “It would be remiss of me to leave out the ultimate benefactor a country could have in the Dart Group.”

Attorney Cline Glidden, senior associate at Ogier, agreed: “I don’t think we can minimise that the Dart Group’s commitment to an investment that has been made that has significantly improved the lifestyle and infrastructure” not only in terms of new roads and hotels but also from an entertainment standpoint with the KAABOO music festival.

Building heights

Dart’s plans to erect an “iconic tower” at Camana Bay as part of a $1.5 billion investment merited consideration, panellists said. But given the size of the project, the tower proposal should be separated from a wider debate about building heights in general.

Currently, new builds are limited to 10 storeys on Seven Mile Beach. Not everyone is convinced this is enough, while others lamented that it had already been a step too far.

According to BCQS’s Day, “We have probably gone higher than we should have done in the 7MB corridor.”

All policy decisions should be predicated on how to foster long-term and sustainable growth, especially in the tourism sector, where not everything is as rosy as it seems, Day argued. The recent spike was partially the result of additional tourists being diverted from the hurricane-damaged Eastern Caribbean. This increase may drop back in this year’s high season and next year.

“The problem is every time you increase the building height on Seven Mile Beach, it impacts on stayover tourism, because it pushes land values to the point where it simply isn’t viable to develop a mainstream-branded hotel on Seven Mile Beach anymore,” Day said. “I don’t think we should unless it is accompanied by an outline business case that shows why increasing the building height will grow the economy in the long term.”

Glidden, a former member of the Legislative Assembly, said previous governments had looked at increasing building heights in the Seven Mile Beach corridor to stimulate economic activity by encouraging the redevelopment of decades-old two- to three-storey properties.

This had turned the developments into attractive investments. Glidden argued that Seven Mile beach is one of Cayman’s natural assets and the place where people want to live. “We have to be cognisant of the fact that those are the reasons for the lifestyle that we enjoy today,” he added.

The question is, “Should we now consider that we need to go higher than 10 storeys or wait for the redevelopment of 2- and 3-storey sites?” Glidden asked. “It is just a matter of time if we want to use this natural asset that we have.”

Building heights may have a role to play in addressing of Cayman for future Caymanians, according to Wight. With the average sale on Seven Mile Beach being in the region of CI$1.3 million, the popular area has become unattainable for most Caymanians.

“It is not a solution to increase by a couple of storeys every few years,” Wight said.

Instead, the country has to determine where it sees itself in the future, whether Cayman should become a Dubai, Hong Kong or Singapore.

“If we don’t raise ceiling heights in certain areas and Cayman remains attractive, you get this sprawling effect of increased property values and the island itself, unless we create more land space, becomes more unaffordable quicker,” Wight said. “By looking at ceiling heights in concentrated areas, we are protecting the ability of Cayman as a whole to become unaffordable.”

Day concurred that one of the biggest challenges in Cayman’s property market is getting the first-time buyer on the property ladder. This issue is not limited to the Seven Mile Beach corridor.

The off-beach townhouse and condo market has seen a strong escalation in price during the past years, with prices in some cases doubling. At the same time, salaries in most industries struggled to keep pace with inflation and the cost of living, let alone property prices.

Day said the government stepped in and reduced stamp duty for first-time buyers and provided the ability to use parts of the pension pot for property purchases. “But going forward, we have to recognise this and manage it,” he said. “It is not going to go away.”

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