Friday, November 24, 2017

Money problems: the global currency system needs reform

Simon Mikhailovich, co-founder Tocqueville Bullion Reserve, shows a gold bar during his presentation at the Cayman Investment Summit on Oct. 11.

For a country like Cayman whose currency is tied to the U.S. dollar and therefore to the whims of the U.S. Federal Reserve’s monetary policy actions, the Cayman Investment Summit had a decidedly gloomy message: the U.S. dollar-led global currency system is in urgent need of reform and central banks have essentially no power to affect monetary or economic goals.

The conference, hosted by the Chartered Financial Analyst’s Society of Cayman, is never shy on pessimism and often invites speakers whose theories run contrary to mainstream economics. But given the track record of mainstream economics, that can be of significant value for investors who have to anticipate the big and small swings in the markets and their underlying economic factors.

Most recently, U.S. central bankers seemed at a loss as to why there is no inflation.

While some blame sharp online retail price declines, to an extent that is still misunderstood by economist, for low inflation figures, others argue that central bankers have been unable to interpret money supply and other monetary indicators for quite some time.

In an article about a crisis of confidence for central bankers, The Financial Times wrote in October that “the ability of central banks to resolve these questions does not just affect growth rates, but is fundamental to the health of the democracies of advanced economies, many of which have been assailed by populist uprisings.”

Jeff Snider, head of Global Investment Research at Alhambra Investment Partners, agrees with these political and social implications, but he says that after the financial crisis “central bankers did not suddenly lose all their power, they did not have it to begin with.”

Snider identifies the Eurodollar market, U.S. dollar-denominated deposits, as well financial instruments and transactions in U.S. dollars outside of the United States, as one large element of the shadow banking markets that are outside of any monetary control.

Jeff Snider, left, head of Global Investment Research at Alhambra Investment Partners, said the global currency system is in urgent need of reform at the Cayman Investment Summit in Oct.

“There is no other, more appropriate place on Earth to talk about money than here” in the Cayman Islands, where U.S. banks are holding more than $1 trillion in U.S. dollar-denominated claims on Cayman banks, he said at the conference on Oct. 11.

Snider’s theory is that economists who viewed each economy as a closed system failed to recognize the effect of Eurodollars. They first misunderstood the growth of the market as capital outflows and then as a global savings glut. Central bankers, on the other hand, recognized these markets but ignored their effect even though monetary supply trends veered increasingly off trend.

Shadow banking means a lot of things to different people. For Snider, it is the balance sheet capacity of private banks globally for Eurodollar instruments, repurchase agreements or repos, interest rate swaps and other financial instruments like FX derivatives.

In September, the Bank for International Settlements, which is sometimes called the central bank of central banks, published a study that estimates $13 trillion to $14 trillion exist in offshore interbank FX derivative dollars that “are functionally equivalent to borrowing and lending in the cash market.”

“It takes the form of whatever liability one bank can dream up that another bank will accept,” Snider says.

Crucially, much of this money is not captured by any monetary statistics which should guide central bankers in their actions and when they set monetary policy targets.

It is not that these developments had gone unnoticed by central bankers. Both Eurodollars and repo were once included in M3, the broadest money supply figure, but discontinued in March 2006 when the Federal Reserve decided it would take too much effort to determine what is going in these markets when for the most part they do not affect the United States.

Former Federal Reserve chairman Alan Greenspan warned for years that finding money and measuring it had become an increasingly dubious proposition.

“The proliferation of products has been so extraordinary that essentially a decision-based policy on measures of money presupposes that we can locate it,” he said in June 2000. Even during his famous “irrational exuberance” speech in 1996, a warning that the markets were overvalued several years ahead of the dot.com crash, he noted that “money supply trends veered off years ago as a useful summary of the overall economy.”

This is evidence, Snider contends, that central bankers have not acted as monetary stewards for a long time. As early as in the 1970s, central bankers suspected the Eurodollar market undermined money supply in some form. Guido Carli, an Italian central banker at the time, warned that there was a monetary blob lurking hidden in the shadows of global finance which multiplied U.S. liquid liabilities outside of any monetary control.

Repo transactions, for instance, were not believed to be monetary transactions. Today, economists understand that in the real economy they are used as a monetary equivalent. The proliferation of products that defy monetary classification and national boundaries has made monetary policy very difficult.

“Because of this, we are forced to reassess everything that happened during the period,” Snider says.

“The idea of a great moderation, a golden age if you will, of classic economic conditions in the ‘90s up until 2007 always seemed a bit off for what actually took place.”

The bank balance sheet capacity of Eurodollars may have been missing from official handbooks, he says, but it has been out there all this time “reshaping the global economy for decades.”

As such, it is a currency system without any currency and it is in urgent need of reform.

“When global money was growing, the global economy was too. No more growth in global money, no more global growth. It’s that simple,” Snider says.

“Now that the Eurodollar system is no longer functioning, the global economy is not fine. It is in fact heading in the wrong direction and the political and social order is slowly being taken down with it.

“The primary risks here are not necessarily economic, they are social and political,” he says. “The economic damage has been done.

“People realize there is something wrong here. They don’t know what it is and their leaders are telling them there is nothing wrong. If you listen to Ben Bernanke and Janet Yellen talk, it is as if the economy is fine and we know it’s not. Not the United States, it is all over the world, Europe, China. The problem is that the longer this continues, the more dissatisfaction will be there.”

Snider has little faith in the central bankers or the politicians, because there is very little consensus what is wrong and much less how to get it right.

A second Bretton Woods that stabilizes the global currency system would be a very positive outcome, Snider believes but he suspects that most reform only comes after a crisis.

Simon Mikhailovich, co-founder Tocqueville Bullion Reserve, agreed that current markets are heading for another crisis.

“Nobody knows when a crisis is going to happen. All we know is that it does not make sense. And when a situation does not make sense, it will eventually resolve itself. But we don’t know how and we don’t know when.”

Mikhailovich’s list of things that do not make sense in today’s market is long.

Real income growth over three decades compared with nominal growth is virtually zero, he notes.

Negative interest rates have never happened before in 5,000 years. “This [makes] no sense, it never did make sense and it makes no sense today.”

European BB-rated junk corporate bonds, he says, are now trading at a yield that lower rate than U.S. Treasuries. “Are they less risky than U.S. Treasuries or does it mean that we have a problem with the way prices are formed?”

Meanwhile, pension funds cannot fund themselves when only 20 percent of all fixed-income securities are yielding over 4.5 percent. The only solution is to increase leverage, but the problem is that asset prices are correlated with the rise of leverage and the rise of debt, which is growing faster than the economy. As a result, there is 40 percent more debt in the world since the financial crisis.

Derivatives are another market conundrum that Mikhailovich points out. Deutsche Bank has $47 trillion of derivatives on their books, three times the size of the European economy, he says. The banks, of course, claim the net exposure is zero as long as they can meet their obligations. Yet it takes only one bank not to be able to meet those obligations to throw the system into crisis.

For the past 35 years, Mikhailovich says, it has been a one-way ride as interest rates kept declining and the values of financial assets kept rising. Very few people working today have experienced a prolonged period of rising interest rates and the effect that has on prices, asset values and markets. “Nobody under 70 has ever seen a real bear market. We have no gut feel for any of this.” Most importantly, “we have lost the culture of preparedness,” Mikhailovich says.

“The key is not to predict the future but to prepare for it.”

Cayman’s newest law firm puts two more ‘women in business’

Christine Bodden and Juliet Fenn

Cayman’s newest law firm is three months old, and its two female founders cite former U.S. First Lady Michelle Obama as inspiration for a venture they hope will “change up the corporate game.”

Jamaican-born, Canada-raised and Cayman status holder Christine Bodden, 45, and Guernsey-raised and educated Juliet Fenn, 52, started financial-services firm Quality Corporate Services Limited in July in a rented office in the old Mirco Centre – renamed and refurbished last year as Cannon Place – and say they are determined to be different.

“We have drive, passion, experience and determination,” Bodden says, “but also humility.”

“As for changing up the corporate game in Cayman’s financial-services space,” she says, “we quote Michelle Obama: ‘We as women, we have to understand that we know more, just even instinctively, than we think we do.’”

Neither Bodden nor Fenn were explicit about what QCSL might do better than their male-led counterparts, but offer intriguing hints: “We couldn’t possibly comment on what we can do that men cannot do in this business,” says Bodden, but “we bring a wealth of experience to this industry and I guess as women we have different needs and wants out of our business.

“As women, and working mothers in this case, we know what needs to get done and we get on with it,” they write in an email exchange with The Journal. “We are champions of multitasking, able to balance work and home life.”

In a refreshing – and provocative – dialog, the pair observe that male-led firms, “in general, are more likely to be striving to get to the top, viewing the world through hierarchy rather than focusing on teamwork, building relationships and ensuring that everyone gets a fair bite at the bullet, whatever their position.”

The allusion to collaborative, cooperative “teamwork” at the new firm echoes sentiments expressed elsewhere by other women in business, who variously characterize their own leadership styles as “affiliative and coaching,” often “consultative,” seeking “contributions” from coworkers, and “supportive of others’ initiative[s].”

Such attitudes are not “softer” than those at larger companies, but intended to broaden participation. Greater inclusion, however, does not indicate lesser requirements for productivity – just a different way of playing “the corporate game.”

“We are passionate about business, but not to the exclusion of all else,” Bodden says. “We may be swimming against the mainstream, but instead of fighting the current, we are always looking for ways to use the current to our advantage for our clients and for the business … we all want to get safely to the other side.”

She employs some tough language to describe traditional – not to say “hidebound” – attitudes.

“As business partners, we are uniquely creating a sustainable professional environment that provides a global outlook,” Fenn says, “yet with a culture that appreciates individuality and smart work vs. an inflexible hard-work model.”

That “hard-work model,” she says, “often overlooks and undervalues – or completely overlooks – talented individuals who want to succeed in the professional space, but face the obstacles of an inflexible work culture dominated by outdated, rigid and blinkered views of what equates to valuable staff.”

On the other hand, “smart work,” Fenn offers, is “more about being organized and efficient rather than being present for long hours because it looks ‘good’ and appears ‘committed.’

“If someone can work effectively and efficiently in six hours or eight hours, as opposed to 10 hours or 12 hours – often referred to as ‘hard work” or ‘putting the hours in’ – then why not?” she asks.

“From personal experience, smart workers enjoy their work more and in turn enjoy life more … a very positive circle.”

And by “blinkered,” Bodden means “corporate cultures that do not appreciate that people have a life outside work … and do not appreciate that egos can be stifling and [can] impact staff turnover, which is ultimately expensive.

“QCSL want to be recognized as professional, authentic and sincere because that comes easily to us. We believe successful companies appreciate the individuality of people,” Fenn says, key to both gaining clients and recruiting and retaining staff, such that they “feel like they are not just a worker but a part of a team and appreciating the need for family/work/life balance.”

Bodden has a 2002 bachelor of law degree from the University of Liverpool, via Cayman’s Truman Bodden Law School, and did barrister training in 2006 at London’s Inns of Court Law School on a scholarship from Appleby, where she worked as a litigation paralegal.

The same year, she gained admission to the Bar of England and Wales, then completed 18 months articles with Appleby, and in 2008 was admitted as Attorney-at-Law in Cayman.

She is a long-standing volunteer lawyer at the Women’s Resource Centre [now the Family Resource Centre], and has been director, corporate counsel and consultant at Sinclairs and in-house counsel at Credit Suisse and Citco.

Fenn attended the Guernsey College of Further Education and in 1992 gained a Certificate in Supervisory Management from Britain’s National Examining Board.

She arrived in Cayman in 2005, spending 4½ years as a senior administrator for fund services at Rawlinson & Hunter.

With a “higher diploma” in “administrative procedures,” a certificate in offshore finance and administration, and a diploma in paralegal studies, Fenn has worked in directorship services for fund structures and corporate management, specializing in company formations, corporate governance, compliance, and liquidations – and at law firms in Gibraltar, Guernsey and Cayman – for more than 30 years.

She is also a notary public and member of the Cayman Islands Directors Association.

While she says she “thoroughly enjoyed her time” at Rawlinson & Hunter, Fenn dropped hints that “not all” her working experiences had been positive, indicating “some negativity” from a previous employer – whom she declined to name – “with regard to the start-up of QCSL.”

“We have definitely encountered some obstacles along the way,” she says. “In fact, there are some out there that definitely want us to fail.”

However, Bodden adds, “we don’t believe that has anything to do with us being female, but more an expression of concern that our different approach may prove to be better and more successful.”

“After all,” she says, turning again to her favorite First Lady, “success is only meaningful and enjoyable if it feels like your own.”

They believe Cayman offers a niche for “a good-quality, registered-office facility” targeted at small companies, with fees tailored accordingly.

“We believe in being approachable and ‘user friendly,’” Bodden says. ”Opening, registering and running a new business is quite daunting enough without being faced with a brick wall of processes, procedures, legal requirements, applications, etc.

“We will be there for our clients, to advise, to discuss, to help clarify the way forward and to simplify – peace of mind is a wonderful thing and we want our clients to be able to count on us for the best possible service and help, and to be human, to understand the issues and challenges.”

Cayman beneficial ownership model comes with cybersecurity edge

Jude Scott, CEO, Cayman Finance

Cayman Islands law governing beneficial ownership data took effect July 1, ushering in a technology-based system to manage the exchange of information about the true owners of Cayman-registered entities.

In an age of daily cyberattacks, the system brings with it questions about safeguarding sensitive business data. Financial information can prove particularly enticing for hackers, making the integrity of the system all the more important.

Cayman Finance CEO Jude Scott discussed the cybersecurity considerations when establishing the database and the elements that set Cayman’s system apart from other international models.

The Journal: What were the priority considerations when determining the format of the new beneficial ownership platform?

Jude Scott: It was important to develop a platform which would fully meet the needs of law enforcement and regulatory bodies both here in the Cayman Islands and in the United Kingdom while at the same time maintaining the basic right to privacy and ensuring the security of what is extremely sensitive data. The data has to be collected, and held, in a consistent and easily searchable format so as to ensure rapid and coherent responses are able to be provided to those tasked with investigating, among other things, organized crime and terrorist financing – that is clearly to the benefit of all. On the other hand, cybersecurity and identity fraud/theft are live issues in today’s world, as demonstrated by a recent worldwide spate of data hacks and, in that context it was critical to ensure that the platform was highly secure both physically and digitally. Every decision, from the extent of the data collected, to the methodology for doing so, to the system for making that data available for searches had to be made on the basis of maintaining that balance.

TJ: Why not establish a central, publicly searchable database?

JS: It is important to note that a central, publicly searchable database does not represent the current “standard” around the world and, in fact, the Cayman Islands platform already represents a level of transparency well ahead of many leading onshore financial centers. The EU’s Fourth Anti-Money Laundering Directive stops short of requiring that information be made available publicly, yet even so, the EU Justice Commissioner, in July 2017, formally reprimanded 17 EU Member States for failure to establish appropriate systems for collecting beneficial ownership information. In that context, the Cayman Islands is at the forefront of compliance in stark contrast to incorrect perceptions of the jurisdiction based on lazy prejudice.

While the U.K. operates a central, publicly searchable database, the data which is submitted is not required to be independently verified. Accordingly, it is hard to know the true value of such an approach for law enforcement (who are the key users of this information). In contrast, the Cayman Islands already operates well-respected and internationally approved verified anti-money laundering and know your customer processes carried out by licensed corporate services providers whose compliance is the subject of regular scrutiny by well-respected regulators. Verification of information is essential in attempting to detect unintentional or intentional inaccuracies in such information by parties seeking to do business in a jurisdiction.

Further, there are real and fundamental issues surrounding the right to privacy and data protection which present significant challenges in the context of a central, publicly searchable database. The Universal Declaration of Human Rights was proclaimed by the General Assembly of the United Nations on Dec. 10, 1948, and states, in Article 12, that “No one shall be subjected to arbitrary interference with his privacy, family, home or correspondence.” A publicly searchable database of ultimate beneficial ownership presents a very real threat to this right as the overwhelming majority of persons owning and/or operating businesses globally do so legitimately and not for nefarious purposes. There is no policy reason which can truly justify exposing the information of all such people, especially when one considers that the recorded information includes residential addresses, dates of birth and passport numbers. One can see, immediately, that there would be very real concerns if such information were to be globally available. By contrast, the platform (which remains under development) will ensure that this critical information is available quickly and efficiently to those authorities who require access to such information in circumstances where there is an active investigation which can benefit from the information. By reference to the Universal Declaration of Human Rights, this ensures that there is no “arbitrary interference” – instead, any interference can occur only where legally justified.

TJ: Describe the “air gap” system that was developed for storing beneficial ownership data. What security benefits does this provide?

JS: There is inherent risk in the transmission of any data over the internet and storage of data in systems connected to the internet and those risks have been cruelly exposed on a number of occasions in recent times, often with devastating results. The “air gap” design, often used in stock exchanges, military systems and other critical systems such as nuclear power plants and avionics, ensures that none of the highly sensitive private data, applications or operating systems required to operate the register (and very useful to law enforcement in the proper circumstances) are exposed in a way which makes it readily available to digital attacks. The objective of an “air gap” design is to reduce the method, vectors, and opportunities of attack.

To ensure that service provider data is protected “end-to-end,” each licensed service provider collects and holds their data securely on their own systems and then, on a regular basis, encrypts the data using a purpose-built hardened operating system at their location, then physically transports the encrypted data to the Beneficial Ownership Digital Search (BODS) System located in the Government Administration Building. By design, the BODS System itself is not linked to the internet or any internal network and can only be searched using a directly connected terminal where physical access is strictly controlled. Breaches of cybersecurity represent the greatest threat to the privacy of the collected data and this approach, while less convenient for service providers, the trade-off is that it tackles that most dangerous of threats in a highly effective way.

TJ: Are there any risks in the “air gap” system that could compromise the stored data?

JS: The Cayman Islands Government and the compliance team at General Registry are examining every aspect of the procedure in order to minimize risks. The procedure specifies that data is encrypted at the service provider’s location and can only be decrypted once inside the BODS system itself.  The BODS system, decryption keys, data and application code, all reside inside a physically hardened hardware platform which is not connected to the internet or any internal networks. Data transfer is expected to be permissible only into the BODS system without any mechanism to digitally transfer data out of the environment.

The legislation imposes significant criminal penalties upon any person carrying out a search of the BODS System without appropriate authority or in any way sharing the stored data otherwise than in accordance with the legislation. It is probably true to say that no system can be perfect, but the best and the brightest IT minds in the Cayman Islands have come together from both the public and private sector to try and build the best possible solution.

TJ: What is expected of businesses under this system, in terms of updating and handling data for the database?

JS: There are two distinct categories to consider here: companies/LLCs registered in the Cayman Islands and, separately, the corporate services providers who provide registered office services in the Cayman Islands.

Entities in the first category who are subject to the requirements of the beneficial ownership regime must seek to ensure that they, at all times, understand their ownership and control structure and are able to identify “registrable persons” – which means those individuals or intermediate holding companies who are required to be entered on their beneficial ownership register. This is an ongoing obligation and companies must take reasonable steps to identify the relevant persons. The legislation provides a number of investigatory tools for companies seeking to comply, including formal notices to request information which may be issued to certain persons in order to assist the investigation. Once registrable persons are identified, the legislation then sets out a number of “required particulars” which must be collected, including residential addresses, dates of birth and the details of identifying documents.

For corporate services providers, they are obliged to provide an information-technology solution which facilitates the storage of beneficial ownership data and its transmission (via the air-gap method) to the BODS System. In practical terms, this amounts to ensuring they are able to store data provided to them by companies, create beneficial ownership registers which comply with the detailed requirements set out both in primary legislation and the associated regulations and put in place processes and systems which enable the data to be encrypted and transported to the BODS System.

TJ: How accessible is this type of system to law enforcement or other relevant authorities?

JS: The data is available within 24 hours (or one hour in urgent cases), 365 days of the year, but only in response to a lawful search request which passes various checks and balances set out in the legislation. Where there is a request from authorities in another country, the law requires an agreement with that country to govern requests and exchange of information. The law is specifically intended to ensure that it is not lawful to make “fishing” searches and it has long been understood that the BODS system’s search function (which remains in development) will ensure that the search results only show data pertinent to a targeted search. Both vertical and horizontal searches can be made, but searches must be by reference to a specific individual or entity. As with all aspects of the platform, the aim is to ensure the correct information gets to the right people quickly, efficiently and in a coherent format, while at the same time ensuring that non-relevant data is completely protected and not even visible to the searcher. This presents some very real challenges, but is critical to ensuring the correct balance between transparency and privacy.

TJ: How does Cayman’s system compare to other beneficial ownership models?

JS: The Cayman Islands operates in a unique market as a global financial hub primarily catering to sophisticated and institutional investors and, accordingly, the Cayman Islands regime has been carefully crafted to achieve the combined aims of greater transparency for law enforcement and preservation of privacy where appropriate.

The Cayman Islands is a leader in transparency standards, having had a world-class, verified anti-money laundering and know your customer regime (which already focused on identifying and verifying beneficial ownership) for more than 15 years.

What distinguishes the Cayman Islands beneficial ownership/AML/KYC regime from most others around the world is that information is collected and verified by licensed Cayman Islands corporate service providers under existing anti-money laundering and know-your-customer laws. Many of the other beneficial ownership registries – including central public registers – rely solely on self-reported information, which can be less complete and accurate. The new laws passed on July 1, 2017 introduce technology-based system enhancements to improve the speed and  efficiency of format in which beneficial ownership information is available to appropriate authorities.

While a number of other jurisdictions have recently taken steps to implement some form of beneficial ownership data collection systems, most of these remain at a fairly early stage of development and the approaches have been extremely varied. In Singapore, access, like in the Cayman Islands, is limited to law enforcement, while Armenia, Brazil, Costa Rica and Mexico have limited access to monitoring government authorities. In India, access is limited to the members of any given company. There is a very wide range to the chronological limits for reporting changes, ranging from two days (Singapore) to five years (Italy). In addition to the Cayman Islands, the U.S. Library of Congress has identified that only Argentina, France, Mexico, Namibia, South Africa and Spain have any form of data verification. We are not aware of any other beneficial ownership models that feature all of the three key components of Cayman’s verified beneficial ownership regime:

  1. The verification of information by licensed corporate services providers
  2. The air-gapped technology platform (as opposed to internet-accessible or interconnected systems)
  3. The availability of accurate and timely information for proper law enforcement and regulation balanced with the right to privacy, data protection and human rights

TJ: Do you foresee Cayman’s model providing a competitive advantage, compared to other offshore financial centers?

JS: The Cayman Islands government has taken great care to develop a model which is proportionate, fair and successful in delivering the important information to the right people and at the right time whilst protecting the personal identifying data of those who operate legitimately and above the law. It is probably too early to judge many (or indeed most) of the nascent beneficial ownership regimes now operating globally and it is only to be expected that the various regimes (including the Cayman Islands) will be modified, tweaked and improved as stakeholders and law enforcement become more familiar both with the issue and the information which is available.

Cayman’s air-gapped technology platform provides critical data security benefits and represents the best possible solution to protect such important and sensitive information. This will be appreciated by our clients, business partners and industry stakeholders around the world, and we anticipate this will become another strategic, competitive advantage for our jurisdiction. For “good actors,” there is nothing to be scared of in the Cayman Islands regime and that should serve to ensure that the Cayman Islands remain a pre-eminent jurisdiction for global financial services.

Real estate, jewelry dealers awaiting new reporting requirements

Members of the real estate and precious metals industries attended an anti-money laundering workshop in Oct. - PHOTO: KEN SILVA

Cayman Islands real estate brokers and precious metals dealers will soon come under extra scrutiny when a new regime kicks in subjecting them to inspections from the Department of Commerce and Investment, which will make sure they are following the territory’s anti-money laundering rules.

Though the new arrangement was made public in early 2016 in preparation for a Financial Action Task Force inspection that will take place next month, details about what is expected from the brokers and jewelers have yet to be finalized. Businesses have yet to receive a handbook spelling out exactly what the DCI expects, and there are no penalties in place that the DCI could levy for non-compliance.

While the rules businesses are expected to abide by are clear, “how they’re going to monitor us is another story,” said Kirk Freeport financial controller Celine Macken.

Until the DCI announced a workshop in October, some businesses were not even aware that they would be subject to additional reporting requirements.

“They sent out an invitation to us three or four days before the conference, but we didn’t know what it was about,” said RE/MAX co-owner James Bovell.

Nevertheless, Bovell, Macken and others in the impacted industries say they have practiced for years strict internal procedures to prevent money laundering and other financial wrongdoing taking place through their businesses, and should be able to easily demonstrate compliance with the DCI.

The Cayman Islands Real Estate Brokers Association has always subjected its members to standards that go above and beyond what government requires, according to Bovell’s colleague, RE/MAX co-owner Kim Lund.

Lund said CIREBA has an independent inspector on contract that audits brokers randomly, and gives them a rating based on what the audits find. Additionally, CIREBA members undergo yearly training to stay up to date with the territory’s regulations, he said.

Non-CIREBA members might be taken off guard by the DCI, Bovell added, but the new regime may also require them to increase their due diligence.

In an interview in October, Lund and Bovell described some of the steps RE/MAX takes to ensure that their clients and customers are undertaking legitimate business.

“If someone comes to us for any transaction – buying or selling – we take copies of their passport, utility bill showing their physical address, or a license from them,” said Lund. “So we’ve got two or three pieces of ID that we put on file immediately.”

“We do ask for source of funds, as well,” added Bovell, who also said that RE/MAX does background checks to see if clients might be politically exposed persons.

Such measures have come in handy in the past: Lund and Bovell said that they once reported a man who was trying to sell someone else’s land, leading to the man’s arrest and prosecution.

Other suspicious activity seen by the brokers includes people from overseas asking for a signed contract before they wire their deposit to RE/MAX.

“They’ll say, ‘Our bank won’t release funds until vendor signs contract.’ That’s suspicious, too, because really they want the signed contract so they can go around showing they bought this property,” said Lund. “We feel the people use that to say they have this property in the Cayman Islands, and use it as means to borrow money. I’ve had this happen a couple times, and we report situations like that.”

However, “long gone” are the days of when people would attempt to purchase land with only cash, or conduct other blatantly suspicious activity, he said. With Cayman having stricter anti-money laundering rules than most other jurisdictions, Bovell said most people would not even attempt to engage in wrongdoing.

Similarly, Kirk Freeport financial controller Celine Macken said she rarely has to flag transactions as suspicious. Most transactions at the jeweler retailer are conducted via credit card or debit card, and are thus subject to oversight by financial institutions, she explained.

“You can’t vet everyone that comes through the door, but that’s what electronic payments are for,” said Chris Kirkconnell, Kirk’s vice president of operations.

Kirk Freeport employees are simply told to check customers’ identification to ensure against credit card fraud, and to take copies of the ID if transactions are larger than $10,000, Macken said. When fraud is detected, they go straight to the police rather than any financial regulator.

“Every now and then, we’ll see fake credit card rings,” said Kirkconnell. “We’re normally the ones that catch them and alert the authorities. Because for us, we’re dealing with high value merchandise and need to cover ourselves.”

Beyond that, there is not much precious metals dealers can do when it comes to curtailing financial wrongdoing, he said.

“We wouldn’t have any customers if we have to act like a bank for every transaction,” he said.

Macken said she hopes the DCI takes that into account as the precious metals industry’s new regulator.

“The biggest thing is they have to recognize how business works,” she said.

With the FATF inspection scheduled for Dec. 4-15, the DCI will have to clarify what it expects from the real estate and precious metals industries soon.

DCI Head of Compliance Claudia Brady said at her department’s workshop last month that the biggest thing businesses can do is keep records of their transactions, know-you-client background checks, and evidence of how they train staff to detect suspicious activity.

If companies do not have that documentation, the Department of Commerce and Investment may conduct onsite inspections and review their documents, she said at the time.

Even though the FATF inspection is right around the corner, Brady promised that businesses would have fair warning of what is expected of them by the DCI.

“We won’t just turn up at your door. We’re going to give you notice – maybe three weeks, a month, or two months so you have time to prepare,” she said. “We appreciate the fact that you’re a business, and we don’t want to disrupt your business.”

Women draw power from conference

Author/leadership coach Maggie Craddock delivered the Next Gen Inspire conference keynote address. - PHOTO: MARK MUCKENFUSS

Mark Muckenfuss

This was not just pink, it was power pink.

In-your-face, I’m-not-afraid, get-used-to-it pink.

Colored lights painted the walls in the Marriott Beach Resort ballroom in a hue one might expect to encounter in Barbie’s Dream House. It seemed not only an acknowledgement of gender stereotype, but a reclaiming of the brand. After all, the Next Gen Inspire 2017 women’s business conference was all about presence and power.

Sponsored by 100 Women in Finance, the half-day event was highlighted by author/leadership coach Maggie Craddock, who delivered the keynote address.

The event also included an hour-long panel discussion on the importance of presence, afternoon workshops and time for attendees to network.

Sisters Harriett Moon and Michelle Wight recently started their own public relations company, Not Your Standard Agency. Wight said the opportunity to talk to other business women was important.

“It’s an amazing platform just to connect with other like-minded individuals,” Wight said.

Moon found it energizing.

“There was some inspiring content,” Moon said. “We got a lot of meetings with new people, so I think I’m going to take from Maggie’s presentation and do my research.”

Keynote speaker Maggie Craddock, right, talks with Tristanna Ebanks during a brief book signing following the Next Gen Inspire conference. – PHOTO: MARK MUCKENFUSS

That research will involve trying to assess the power styles of the people Moon and her sister encounter in their business dealings.

In her conference address, Craddock laid out those styles, which she defines in her book “Power Genes: Understanding Your Power Persona – and How to Wield It at Work.” The concepts that led her to categorize the way people exercise power, she said, came from years of working with top business people.

“Power, as we look at it, is a relationship with others,” Craddock said, “the ability to negotiate with others.”

She divides power styles into four somewhat self-explanatory types: pleasers, charmers, commanders and inspirers. While most people will exercise all of these, depending upon the situation, the dominant power style a person defaults to, she said, typically depends on the social dynamic they grew up with as a child. Her template comes from gathering information from her clients.

“We began to study thousands of family histories,” she said. “Over the past 20 years, whether I’m working with a group or an individual client, I’ll have sessions where I will sit down and do a power map.”

What she discovered, she said, is that people will use a certain type of power to “try and get their needs met.”

Recognizing your own power style and those of others, allows you to modify your behavior to get the most out of your interactions with others, Craddock said.

“The basis of power,” she said, “is really the conversations you have with yourself. The better we are at identifying our own [style] the less judgmental we are and the more able we are to identify them in others.”

Once that happens, she said, people are more easily able to adapt their style to a given situation.

Lani Bothwell, of Maples and Calder, said Craddock’s ideas made sense to her.

“It is about being agile with other people’s personas,” she said.

The local chapter of 100 Women in Finance got its start in 2002, when a group of seven Cayman business women met and talked about joining the worldwide organization. Within five years, they had more than 700 members. There are just over 200 members of the organization’s year-old Next Gen group, made up of women with less than 10 years of business experience.

Recently, the Cayman organization started a program for girls 10-12, GirlForce, which teaches goal setting and provides career guidance.

Amanda Pullinger, CEO of 100 Women in Finance, made note of that program when she addressed the conference.

“This may be another way in which Next Gen is leading the way for the rest of the world,” Pullinger said.

Novia McDonald-Whyte, of the Jamaica Observer, served as a panel member at the conference. She said the gathering was representative of a change she sees happening in business in the Caribbean.

“An event like this always happened, but we weren’t bold enough to say it’s for women only,” McDonald-Whyte said. “That’s the only difference. I think it’s just now that we’re bold enough to say we want the power and the earning power that goes with it.

“What comes with that” she added, “is a whole generation of women behind us no longer settling.”

Leadership with a personal touch

Jackie Doak

Mark Muckenfuss

Ask Jackie Doak for a single piece of advice for women pursuing business careers, and she can’t do it. Instead, she’ll give you half a dozen.

She seems to have a difficult time containing the host of ideas blowing through her mind.

Doak, 51, the president of Dart Real Estate, is one of the Cayman Islands’ most prominent businesswomen. She oversees the property development at Kimpton Seafire Resort and Spa and has guided the development of Camana Bay, where her offices are located, since its inception. With her success has come some perspective and some principles she tries to follow.

“Every woman should have a goal and an aspiration that speaks to their purpose. Each and every day, they should make decisions that move them toward that goal.”

Goals can change. Doak, herself, has had three different careers. She began her professional life as an attorney after graduating from Fredric G. Levin College of Law at the University of Florida. Doak spent nearly two years at Carlton Fields, a Tampa-based law firm, working in commercial litigation. She said she not only liked the job, but the process of becoming an attorney.

“I thoroughly enjoyed law school,” Doak said. “I love the analytical thinking, the challenging thinking, the Socratic method. I love researching. I can get consumed.”

She got a little too consumed, she admits, but felt she had found her place.

Then came an unplanned turn in her road.

Her father had owned an office supply store in the Cayman Islands – Doak grew up here until moving to Florida in her high school years – since the 1970s. He needed help and asked her to take a one-year detour in her legal career. She agreed, and returned to Grand Cayman in 1993.

“I have not been back,” she said.

Her next career change came in 2002, when she and her husband, John, an architect, had their first child. Doak said she began looking for job opportunities that would allow time for family.

“What consumes me now  is being able to integrate and balance work life, to be present, whether it’s with family or with work.”

Doak said she is fortunate to have her children nearby during the workday. They attend Cayman International School, which is in the Camana Bay complex. Occasionally, she will see them outside her office window, trooping off on a field trip.

“I could run out that front door and give my son and daughter a big hug,” she said.

Their connection with Camana Bay, she said, gives them a better understanding of her job. That makes it easier when work pulls her away from home for a conference or an off-island meeting.

When it’s time for family, she does her best to make sure her focus is there, she said. On vacations, that sometimes means locking her cellphone in the hotel room safe.

“You consciously try to put the phone and work down, and separate yourself,” she said.

“It’s all about how you make people feel and … how you treat them.”

Bringing a personal touch into the workplace is important,” Doak said.

“My grandfather was chairman of Wimbledon (tennis tournament),” she said. “He really was instrumental in many of the things that I do today. He taught me the importance of that personal connection.”

He wrote personal letters to anyone connected with Wimbledon, she said. Last year, Doak did the same. She spent four days during her Christmas holiday, writing individual notes to the 124 members of her team at Dart.

“It’s important to me for my team to know how much I value them,” she said.

Anna Wootton, the company’s public relations manager, said employees were surprised to find the notes on their desks on the first day they returned after the new year.

“It’s a moment of light,” Wootton said. “It’s nice to feel that personal touch.”

Many employees still have the notes pinned to their cubicle walls, Wootton said.

Gabrielle Wheaton, senior executive coordinator, serves as Doak’s right-hand woman. She said her boss’s ability to connect with people is critical to the way the company does business.

“Jackie is very much about putting the right person in the right position,” Wheaton said. “She’s about finding the best way to make things work.”

Often, she said, Doak sees things in others they may not see themselves.

“She is very good at seeing that someone is capable of something and just needs a nudge in that direction,” Wheaton said. “That’s part of the reason I have this position. I wasn’t sure if I was ready for it. She was the one that said, ‘No, you can do this.’”

Wheaton was talking at the end of her second week in her new position. But she said she is convinced Doak was right in her assessment. “The learning never stops.”

Learning can come from many different sources, Doak said. The more sources, the better.

“An area that I have focused on  in the last five years was inclusiveness in the decision making process,” Doak said.

As a woman in business, she said, she has a particular appreciation for diversity in the workplace.

“The development and construction world has been very male dominated,” she said. “I have attended meetings with U.S.-based development  companies, where I am the only woman in the room.”

That is not the case so much in the Cayman Islands, she said, where there are many examples of women in leadership roles, both in business and in government.

“At Dart, we have an exceptional group of women leaders,” she said. “One of the [company’s] values is meritocracy. Both women and men become leaders based on their skills and experience. As a result, different points of view are brought to the table and positively influence the decision-making process.”Wheaton said other women around Doak appreciate that.

“I am old enough that I grew up in an era where women were fighting to be recognized,” said Wheaton, 46. “We know there are still issues with gender equality and pay equality. It’s hard to let that go and not say, ‘Can I really achieve the same as a man?’ But working with Jackie, it’s not really even a question.”

“I would encourage laughter, don’t take it too seriously.”

Doak said she looks for opportunities to bring levity into the workplace. She does daily walkabouts through the office, typically in the morning, in an effort to help energize her employees.

“I make observations, say something loud, tell a joke, jump into meetings,” she said.

She said she also enjoys walking the campus of Camana Bay, seeing what has been accomplished in the past 10 years and appreciating it. That includes the facility’s fountains, which sometimes play a role in maintaining her perspective and keeping things light.

She smiled.

“I’ve been known to run through them.”

Women in business: ‘Performance, not potential,’ and prognostication

Denise Gower, Fountainhead

They all speak of obstacles, some in the natural course of creating a business or a self-styled niche, but too often in terms of something more subtle: an attitude, an amorphous resistance, almost a resentment.

You might call it lowered expectations or a tacit doubt, but the women in business have all felt it at one time or another, to one degree or another.

The quiet sexism – oddly among both men and women – is an old story, making it both bane and boost. Because it is not new, no one is a stranger to it, and has learned to manage it with a minimum of fuss, a deft deflection.

Simultaneously, however, it is one more challenge, both wearisome and predictable, that most men never face.

Caroline Barton is a partner at Appleby, and says the resistance she has faced has been modest at worst, and looks forward to increasing “diversity” at the firm as women all around her move into positions of authority.

“I have been fortunate to be part of an organization in which I have felt valued in its continued growth,” she says, although not ignoring the “gendered” challenges.

“It is undeniable that partnership can be difficult for women for various reasons. Notably, the point at which attorneys are most often prepared and identified for potential partnership frequently coincides with the time when many women would ideally like to start a family and take some time away from the office.”

Barton’s timing was fortuitous, however, coming after she had already started her family – while support from her colleagues proved crucial.

“In my situation, it was the point at which I returned from maternity leave after my first child, where my practice flourished because I had the encouragement and support of the senior partners in my team. I decided – as do many women – that I could make both family and partnership work,” and Appleby, she said, “believed it and facilitated it.”

At Fountainhead, a “marketing communications agency,” nearly six years old and a relative newcomer, founder and owner Denise Gower says she had “always had an entrepreneurial spirit,” and part of her wanted “to do things a bit differently or to be more engaged in all elements of the companies that I had worked for, and not just my little section of it.”

Caroline Barton, Appleby

More personally, however, Fountainhead was the product of “a purpose – the really important stuff,” she says.

“Purpose is where we ask ourselves what it is that draws us close; where do our hearts lie? How can we help to make the world or even our own community, a better place?”

That sense of direction carried her through, knowing she had to keep going and get on with it.

Too often, the gentle hum of sexist stereotyping rang in her ears: “I have come across this more times in my career than I really care to remember,” Gower says, “the ‘don’t-you-worry-your-pretty-little-head about this strategy stuff – just organize the company Christmas party’ kind of response.

“It is ugly and depressing and very difficult to deal with. This is, in part, what inspired me to start my own business, because it is frustrating work, swimming up that stream all the time.”

Headlines about sexual harassment at Fox News and in Harvey Weinstein’s Hollywood, and September’s Everett, Washington, challenge to a city ordinance prohibiting female baristas from working in their bikinis, do not appear to have made much difference.

“Even recently, I had someone demand to liaise with a male employee about an issue,” Gower says. “It is a difficult thing to maneuver.

“Ultimately, I would love to be able to change these people’s minds and show them the light, but, of course, that is not possible – we cannot change people’s minds for them. We have control only over how we react to things like this. So I have a choice to let it upset me or to find some other way of finding a win-win resolution to issues. Forcing or demanding is not the answer.”

Lesser recognized is a similarly skewed response from other women: “I have experienced that too,” the Fountainhead founder says. “Sentiments inspired by jealousy perhaps? Or thoughts of ‘I could do this much better than you?’ Again, difficult and ugly. Maybe it isn’t a gender issue, but a human issue?”

And that is where Gower’s and Barton’s personal ambitions and intelligence rise to the surface.

“I have met and know more people – men and women – who are supportive, uplifting, encouraging and overall wonderful than I do the ones who are the opposite,” Gower says. “I guess it is up to me to choose the ones I listen and give credence to. The choice seems obvious, right?”

Barton, who became an Appleby partner in January 2016, sees an erosion of stereotypes, a rising tide that will boost business for everyone.

“Diversity,” she proclaims. “Appleby has approximately 60 partners globally and about 25 percent of those are women. The Cayman office partnership includes seven Caymanians. Again, approximately 25 percent of the Cayman office partners are women.”

This still means women fall 25 percent short of parity, both globally and locally, but the process, Barton says, is well under way: “Looking at my own team, there are a large number of women across various service lines in the firm including lawyers. In a short space of time, I think we will see a powerful female force in the legal market which could ultimately tip the balance.”

Last year, she says, almost 70 percent of U.K. admissions to law school and slightly more than 60 percent of admissions to the bar were female.

In late 2016, the New York Times reported women had for the first time outpaced men in U.S. law school admissions, saying 55,766 females were studying for a “juris doctor” degree, compared with 55,059 males, and that more than 51 percent of first-year law students, 19,032, were women, while 48.6 percent, 18,058, were men.

Still, at least in the U.S., according to a 2017 survey by the Chicago-based National Association of Women Lawyers, women have some distance to go before achieving parity in the profession. Only 19 percent are equity partners and 30 percent non-equity partners; women earn between 90 percent and 94 percent of men; the top earner at 97 percent of U.S. firms is male while 70 percent of those firms have one or zero women among their top 10 “rainmakers.” And women make up only 25 percent of any firm’s governing bodies, such as the top “governance committee,” the compensation committee or as a managing or practice group partner/leader, although, National Association of Women Lawyers says, this appears to have doubled in the last decade.

More generally, an Oct. 26 Washington Post “Outlook” piece asked, “Can we talk about the gender pay gap,” leading with “the median salary for women working full-time is about 80 percent of men’s.” That gap, put in other terms, means women are working for free 10 weeks a year.

Barton acknowledges growth in the number of women in the practice has been slow, but “I believe we will see women continue to move up the ranks in increasing numbers and hopefully the playing field will even out.

“We are the examples of working in an environment where women can, and are, encouraged to succeed. Appleby has embraced diversity, and has set this example in its leadership, and we can now see the talent pool expanding. “

She indicates the key to that diversity is “this new workforce,” referencing millennials as they come of age.

“With our commitment and contribution, all of the assumptions and unconscious bias[es] about women in the workplace can then erode and, in the words of Sheryl Sandberg, ‘there will be no female leaders. There will just be leaders.’”

Sandberg is chief operating officer at Facebook and the first woman to serve on the company’s board of directors. She previously served as Google’s vice president of global online sales and operations, and between 1996 and 2001, was chief of staff for U.S. Treasury Secretary Lawrence Summers. In 2012, she was named to Time magazine’s annual list of the 100 most influential people in the world.

While Sandberg is exceptional, she is emblematic of a slow, if steady, increase of women in the “C-suite.” Cayman insurance leader Island Heritage boasts two women with suite seats: Chief Financial Officer Alissa Matthews and the company’s first female Chief Underwriting Officer and Senior Vice President Annette Jim. Island Heritage’s Bermuda headquarters boasts another top-tier female, Chief Administrative Officer Abigail Clifford.

Jim, of Trinidad and Tobago, joined the company in 2006 as underwriting manager, gaining her chief underwriting officer role in 2010. Before Island Heritage, she was the first female insurance broker in Port of Spain, ultimately gaining appointment as supervisor, then general manager before arriving in Cayman.

Jim boasts more than 20 years in the industry, and serves as chair of the General Insurance Standing Committee of the Cayman Islands Insurance Association. Yet even with one of the highest-level senior-management titles in the business, she still, at least initially, smacked her head against the glass ceiling.

“The saying ‘men are promoted on potential, women are promoted on performance’ comes to mind here,” she says, recalling earlier days. “So does the remark of one of my first clients as a broker in Trinidad. During our first meeting, he told me outright that he’d never had a female manage his affairs and didn’t think I would be up to it.

“Well, by the end of the year, he gushed that I was the best account executive he’d ever had,” she says, but had digested the lesson about “performance.”

“From that initial interaction, I knew I’d have to work harder than any man to win clients. So I made sure that I knew everything. I stayed on top of industry knowledge, was proactive in making recommendations to my clients where I’d learned about something that might benefit them and I met all deadlines.”

Annette Jim, Island Heritage

Described, rather ironically, by Island Heritage Marketing Manager Monique Bush as a “ballsy force in the industry,” Jim, as head of the insurance association’s standing committee, oversees technical issues, education, training and regulatory challenges.

“To break through the glass ceiling,” Bush says, “Annette had to put in longer hours than most men and she made sure her opinion mattered and was heard.”

While insurance remains largely “a man’s world,” Bush says, Jim observes a degree of progress through the years, but is not naïve: “Though nowadays the industry comprises a number of women, many still don’t hold very senior positions and are often overlooked for promotion.”

The underwriting team, she says, comprises 25 people under three managers, reporting to Jim, who records the lowest attrition rate in the industry. Apart from her tenacious determination, the chief underwriting officer attributes her success to a collaborative management style – and this is where women appear to diverge most often from their male counterparts.

Management styles

New York’s Fast Company business magazine this summer published “6 Leadership Styles, And When You Should Use Them,” subtitled “great leaders choose their leadership style like a golfer chooses his or her club, with a calculated analysis of the matter at hand, the end goal, and the best tool for the job.”

All of which is to propose that a mix of styles, judiciously applied in a timely fashion is likely to produce superior results.

Writer Robyn Benincasa quotes author and management consultant Peter Drucker, offering pithy advice in banal chiasmus that “management is doing things right; leadership is doing the right things.”

“Manager and leader are two completely different roles,” Benincasa writes, “although we often use the terms interchangeably. Managers are facilitators of their team members’ success. They ensure that their people have everything they need to be productive and successful; that they’re well trained, happy and have minimal roadblocks in their path.”

The author proposes six types of leadership: The pacesetting leader, who “expects and models excellence and self-direction” when quick results are needed; the authoritative leader, who “mobilizes the team toward a common vision and focuses on end goals,” leaving individuals to tap their “entrepreneurial spirit and vibrant enthusiasm”; the affiliative leader, who creates “emotional bonds,” fuelling a sense of organizational unity; the coaching leader, seeking “to build lasting personal strengths,” making teammates more successful; the coercive leader, who “demands immediate compliance” – effective in times of crisis, but dangerous “because it can alienate people and stifle flexibility and inventiveness”; and the democratic leader, who “builds consensus,” asking, for example, “what do you think?” in pursuit of “fresh ideas from qualified teammates.”

“If you take two cups of authoritative leadership, one cup of democratic, coaching and affiliative leadership, and a dash of pacesetting and coercive leadership,” Benincasa writes, “and you lead based on need in a way that elevates and inspires your team, you’ve got an excellent recipe …. ”

Barton, Gower and Jim appear to employ a kind of collaborative technique, a collegial approach that seeks cooperation from their teams.

At Appleby, Barton says, “our clients are situated across the globe and all have differing experiences and demands,” which requires a calibrated range of responses.

“The more diverse our firm’s leadership is, the better we can understand our clients’ needs and provide exemplary service,” she says.

A corporate culture of “collegiality, integrity and excellence” affects both the firm and its clients, themselves “becoming more diverse and inclusive,” she says.

As per Benincasa’s “recipe,” Barton thinks “any successful organization benefits from a few leadership styles working in tandem.”

Her own leadership, she says, blends “affiliative and coaching.”

“My personal belief – and part of Appleby’s ethos – is that people come first, and it is key to our success that our people are motivated and developed for the future.

“Building relationships, creating a clear path for communication and developing others are ultimate motivators for any team and will improve performance,” ultimately boosting the “long-term strengths” of both employees and the organization.

Fountainhead’s Gower has an intensely personal approach to her five-member shop, among the reasons she has “experienced some incredible growth over the past six years.”

“Sometimes people will come in and say ‘we need a print ad.’ Well, maybe they do, but maybe they don’t. Maybe they need something else that will have more impact, will provide a more measurable result, will be more cost effective, will reach a wider audience, both increasing target audiences or furthering geographic reach, etc.”

The initial process is “exploratory,” both prolonged and deliberative; “we don’t want to just put together pretty pictures for our clients and then tick the box and say we are done.”

Gower describes her leadership as “definitely a collaborator and consultative in approach.”

“I listen to, and value, everyone’s opinions when we address an issue. I involve everyone in our own strategic-planning process and am open about where we stand financially as a company. I am not a micro-manager, and I do believe that people need to be trusted to do their jobs to the best of their abilities.”

She acknowledges her approach at times can be a little bumpy, and “sometimes … lead to learning experiences,” but, she says, “it is always useful.

“We work in an open-concept office where we discuss and collaborate and solve problems together. I try to create an environment where people feel that their contributions are valued and where they can speak their minds. I also believe that this is one of the ingredients of our ‘secret sauce’ that allows us to create good work that works.”

Fountainhead’s focuses on the “integrated” in “integrated communications agency.”

“Some agencies in Cayman specialize in particular areas such as digital marketing, whereas we like to get more involved in understanding a client’s business objectives and finding the best way to meet those objectives. We are careful to walk clients through a process that helps us all find the best solutions and then execute them.”

Island Heritage’s Bush speaks with an economy of expression about the company’s chief underwriting officer’s leadership.

“Annette makes decisions quickly, but likes to empower her team by including them in the decision-making process.

“She is supportive of others’ initiative, especially when she recognizes a passion for insurance – which is unfortunately, commonly overlooked by young people as a career,” Bush says.

The three prognosticate where “women in business” might go in the next five years.

Barton thinks change will come, measured and steady.

“In the next five years, I hope to help move the firm towards our own established vision,” she says. “Change starts from the top and we are aware of that. We are also aware of the changing needs of the workforce.”

Millennials, she says, will comprise almost half the workforce in the next half-decade.

Personally, she falls “just on the cusp of the millennial movement and [I] understand the changing values and demands of millennials – they want mentors, more emphasis on work/life balance. Their value in the office is not solely monetary – they want to believe they are part of something bigger and making a real contribution.”

Understanding this emerging force, “and coupling it with the traditional ‘hard work gets results,’ work-centric attitude,” she says, Appleby hopes to build an “empowered workforce,” producing top-notch work and fresh ideas.

“Because, at the end of the day,” Barton says, “it still is about business.”

Gower’s “vision” for Fountainhead is a “boutique agency that provides integrated marketing communications services for companies that are entrepreneurial, companies that hope to make the world a better place or contribute to it in a meaningful way.

“What actions could I take to help grow someone else’s business, helping them to employ more people and to enjoy their own success?” she asks. “We blend traditional and digital, working together to provide a consistent experience for the end customer. There is too much gobbledygook in the marketing world. We want to cut through all of that, make things simple, directed toward the business objectives.”

Finally, Jim, with that economy of expression, says she hopes to lead Island Heritage to do better what it largely does already: “From an underwriting perspective, Island Heritage’s current focus in on innovation towards greater customer convenience while maintaining high security standards.”

Just under one in five investment fund employees are female

Women represent only 19 percent of staff in the alternative investment industry. Among senior staff only 11 percent are women, a study by Preqin shows.

The rate varies depending on the role and declines according to seniority. The highest proportion of women is among junior employees, where they account for 29 percent of the workforce. Women are most represented in investor relations and marketing teams, as high as 53 percent at venture capital firms.

In contrast, the share of women is much small in investment teams, a figure that goes as low as 10 percent at hedge funds.

The board of directors for an average alternative assets fund, meanwhile, only comprises a mere 5 percent of female members.

Amy Bensted, head of Hedge Fund Products at Preqin says the low representation of women at alternative assets firms is an issue that has seen increasing attention over recent years.

“Traditionally a male-dominated industry, the proportion of female employees across the industry is significantly less than 50 percent, with only investor relations teams in some asset class approaching or surpassing a rate of equal representation. It is notable that women are best represented in client-facing or finance roles, while the deal making and operations teams are the most male-dominated,” she noted.

“Beyond this, what is most striking is that even where women are well-represented among junior staff, this is not translating to more women in senior roles. The disparity in the rates of junior and senior female staff shows that progression through the industry remains rarer for women than for men,” she said.

“This contrasts sharply with institutional investors; women constitute one in five senior staff at public pensions, and more than one in three at foundations. The industry has some way to go before achieving true parity between genders, and this issue will continue to be closely monitored by commentators and industry bodies over the coming years,” Bensted concluded.

Globally the overall rates of women in the industry varied only from 16 percent to 23 percent by region and asset class.

Two years ago, Joan Solotar, then Head of External Relations and Strategy at Blackstone, highlighted the problem of the talent pool potentially being too small: “Out of the roughly 1,000 applicants applying to the associate position, only about 100 were women. How are you going to get to 30 percent if only 10 percent of applicants are women?”

For its Women in Alternative Assets Report, Preqin used a database of over 200,000 industry professionals to highlight the trends in the workforces of active fund managers and investors.

Chamber honors vital business contributions, beyond pure economics

Tower staff pose with their awards as the business claims two gongs. Tower were the recipient of the Best in Show award in the Small Business of the Year category and in the Marketing Campaign of the Year category.

The Chamber of Commerce celebrated 16 Grand Award recipients at the Chamber of Commerce Business Excellence Awards at The Ritz-Carlton, Grand Cayman in October. The inaugural event attracted more than 200 guests, as well as Joseph Hew, the Minister of Commerce, Planning and Infrastructure, and Roy McTaggart, the Minister of Public Finance and Economic Development, both past presidents of the Chamber of Commerce.

The Chamber Awards focuses on aspects that benefit the Cayman Islands, in addition to the economic contribution that businesses make.

“The business sector of the Cayman Islands is critical to both our economy and our way of life. While financial contributions of our members are understood, other contributions are sometime overlooked,” said Chamber President Kyle Broadhurst in his welcome remarks. “This event is about ensuring that the vital contributions of our members, beyond pure economics, are recognized.”

A total of 45 businesses submitted entries for consideration in eight different categories. The submissions were evaluated by local and international reviewers and 16 Grand Award recipients, two in each category, were announced on the night.

The top award recipient in the eight categories were:

  • ECO Warrior Award – NCB Group
  • Marketing Campaign of the Year – Tower
  • Outstanding Workforce Development Initiative – Grand Cayman Marriott Beach Resort
  • Community Service Project of the Year – PwC
  • Outstanding Innovation Award – SALT Technology Group
  • Commitment to Education Award – The Ritz-Carlton, Grand Cayman
  • Small Business of the Year – Tower
  • Business of the Year – Cayman National

In addition, the Chamber presented a Lifetime Achievement Award to Caymanian businessman Cardinall DaCosta, owner of Puritan Cleaners and one of the 10 founders of the Chamber of Commerce in 1965.

Mr. DaCosta has shown outstanding support to the Chamber and the business community. He also played a pivotal role in the development of the community. He was a key figure in securing public beach on Seven Mile Beach during the 1970s, working alongside Commissioner ACE Long. He was a founding member of both the Chamber of Commerce and the Junior Chamber of Commerce, as well as the Rotary Club of Grand Cayman.

Minister of Commerce Joseph Hew presents Cardinall DaCosta with the inaugural Lifetime Achievement award.

Minister Hew presented Mr. DaCosta with his award and introduced a video of Mr. DaCosta’s many achievements.

“I am honored to be here to add my wholehearted support for the Chamber’s inaugural Business Excellence Awards. Tonight, we recognize the achievements of outstanding businesses and entrepreneurs that invest in people, deliver superior service and give back to the community,” the minister said. “It is inspiring to be in the company of so many high-achieving organizations and individuals whose tenacity, productivity and vision give us reason to pause and be proud.”

Strategic marketing and communications agency Tower won two awards on the night. Tower was awarded Small Business of the Year and Marketing Campaign of the Year.

“As Tower has just celebrated its 18th birthday, the timing couldn’t be better to celebrate these awards,” said managing director Lynne Byles. “They are a testament to our talented team who bring creative ideas and strategic work on behalf of our clients every day.”

Tower received the Marketing Campaign of the Year award for its work for Taste of Cayman 2017. The campaign included digital, print, radio and TV advertising, media relations, social media marketing, outdoor marketing and community engagement.

Cayman National was awarded the “Business of the Year” Award. The bank was also named a Grand Award winner for the Outstanding Workforce Development Award.

“We pride ourselves on customer service excellence, commitment to our people, underpinned with profound respect and pride in our country,” said Ormond Williams, Cayman National Bank president, in a statement.

“We actively invest in the personal and professional growth of our staff through a wide range of opportunities, including full scholarships for academic and technical qualifications at local and international universities and places of higher learning along with diverse conferences for professional and networking exposure,” Mr. Willams said.

About 98 percent of the bank’s staff is Caymanian.

Well-trained staff helps the bank deliver consistent customer service excellence and personalized service, he said, adding, “We also ensure our staff are physically and emotionally healthy by encouraging them to remain active, including valuable health information in weekly newsletters and by offering corporate gym rates.”

As an active member of the community, Cayman National contributes significant sums of money to various organizations and staff members volunteer in community improvement activities, the bank’s president said.

“Cayman National is proud to win these awards at the inaugural Chamber of Commerce Business Excellence Award ceremony and it is a privilege and honor to now hold the title of ‘Best in Show’ for the ‘Business of the Year’ Award,” Mr. Williams said.

Wil Pineau, CEO of Cayman Islands Chamber of Commerce, said, “Congratulations to the management and staff of Cayman National on this well-deserved recognition.

“The Business Excellence Awards enables Chamber members in all industry sectors and sizes to share their best practices and to celebrate their business and community achievements. We salute Cayman National on being selected Business of the Year for 2017 and wish the management and staff continued success in the years to come.”

Inflation, quantitative easing and US interest rates

The Federal Reserve has for the most part missed its 2 percent inflation target. - PHOTO: Bloomberg.

Andrew Baron, Butterfield

There are two forces holding down long-term interest rates in the U.S. currently, despite above-trend economic growth which might otherwise point to higher rates. The first is the U.S. Federal Reserve’s balance sheet expansion, or quantitative easing as it is known in the markets. The second is a pronounced slowdown in measured and expected inflation over the course of 2017.

In the aftermath of the credit crisis and deep recession, the Federal Reserve wound up setting short-term interest rates at zero in order to inject liquidity and stability to financial markets. In addition to setting short-term rates at zero for an extended period, the Fed embarked on another method of injecting money into the monetary system called quantitative easing. Quantitative easing, or “QE” for short, is a simple concept, if highly experimental and previously unprecedented. QE in practice is just the process of buying U.S. Treasuries and agency mortgage-backed securities, using the notional balance sheet of the Fed. As the central bank bought bonds from investors, those investors sought other uses for the capital they received from the sale of their securities. Economic theory holds that this activity should foster an environment of high liquidity, financial stability and low long-term interest rates.

In terms of scale, the Fed increased its balance sheet from roughly $900 billion dollars of securities to over $4.2 trillion, buying U.S. Treasuries and agency mortgage-backed securities over the span of the last 10 years. The Fed was actively buying new bonds to increase its balance sheet through 2013 and has, until very recently, held in place a policy to maintain the current balance of securities at its high level by reinvesting all maturities and principal repayments. The scale of this program, along with similar programs enacted around the rest of the developed market world, have boosted demand for “risk-free” assets and suppressed long-term interest rates.

On inflation, there is a pervasive line of thought within the Fed and among market participants that inflation is running consistently low (or too low). There is a “target” level, over the medium term, for inflation as measured by the core personal consumption deflator, or Core PCE, of 2 percent as set by the Fed. The 2 percent target has been implicitly set by Federal Reserve officials since the turn of the millennium and it has been explicitly stated in Fed communications since 2012. As we write, Core PCE is running at a 1.3 percent annualized pace, while overall CPI is running at 2.2 percent and Core CPI at 1.7 percent. Over the last 20 years, Core PCE has fluctuated in a range of 1 percent to 2.3 percent, with an average of 1.7 percent, so it is fair to say that for most of the tenure of the majority of people who work in today’s financial markets, the Fed has “missed” its inflation target. Indeed, if one looks at certain survey measures of inflation expectations, those too have fallen since the middle of 2014, although not precipitously. Low-realized and low-expected inflation has a tangible effect on interest rates, especially on longer-term interest rates, pushing them lower. After all, if inflation is expected to remain low 10 years from now, one only needs a certain premium over that inflation rate to be convinced to purchase a bond with a 10-year maturity.

The real question here is, “What happens to interest rates if these phenomena reverse?” Just as QE and balance sheet expansion on an unimaginable scale has had a downward effect on rates, should not balance sheet contraction push rates higher, all else being equal? This process is rapidly becoming a reality the market will have to deal with. In September 2017, the Federal Reserve announced that it would begin its program for the reduction of its balance sheet. While the reduction will begin extremely slowly and will only be reduced by slowing the pace at which maturities are reinvested, it is nonetheless a dramatic change. Thus far, as of this writing, the markets have taken this initial step in stride, but future reductions in central bank demand for Treasuries can provide the impetus for an upward bias in longer-term rates. Similarly, there is much complacency in markets as to the future rate of inflation. With job growth strong and the unemployment rate below what most economists consider full employment, there is extant danger that wages may begin to rise at a faster pace. These types of changes in the labor market happen slowly at first as the unemployment rate falls and then tend to gather pace more quickly than markets (or the Fed) expect, the closer the economy gets to full employment. If inflation expectations move higher, in conjunction with the Fed reducing its balance sheet and its role as the marginal buyer of U.S. Treasuries, it could be a recipe for a sharp reversal in longer-term interest rates.

Cayman’s new foundation company

Antony Duckworth

Antony Duckworth, Collas Crill

If you want the best structure to manage property or conduct a business, for the benefit of a family, or to fund a philanthropic project, or to carry out a plan of any kind whose goal is not simply to make money for members, please take a look at Cayman’s new foundation company – introduced by the Foundation Companies Law that came into force on Oct. 18, 2017.

A foundation company can be used for private, commercial or philanthropic purposes.

It has the well-known advantages of being a company; and it is subject to long-established legislation.

It has great flexibility, with regard to objects, management, supervision and everything else, enabling it to be tailor-made to the founder’s plan and circumstances.

It has clear advantages over the trust, over the usual “not for profit” company, and over the foundation introduced in other offshore centers.

Comparing the trust

In comparison with the trust, the big difference is, of course, that a company is a legal person. No trustee is required. There are no complications inherent in a change of trustees.

All kinds of business and dispositive arrangements can be included in the constitution of a foundation company. Any task or power that can be given to a trustee can be given to a foundation company – and can be given on whatever terms the founder wishes.

Those who stand to benefit can be given the right to benefit, or the right to participate in the administration of the company, or the right to an accounting. The default rule, if the constitution is silent, is that beneficiaries have no rights.

The directors of a company have different duties to those of trustees, and owe them to the company, not the beneficiaries. Generally speaking, it is less risky to manage a company than to administer a trust.

With a trust, there are sometimes doubts as to validity, which can make life very difficult for everyone involved. But with a company, the Registrar’s certificate is conclusive.

With a trust, there may well be uncertainty about how the courts of some foreign countries would treat the trust and the trustee; but nearly all countries have the concept of a company, so the risk of adverse treatment is much less.

Litigation risk is perhaps the biggest drawback of a trust; a company has a smaller risk of getting entangled in litigation, because the court has a smaller jurisdiction. And some settlors are uncomfortable with the idea that the court might be persuaded to give the trustee directions of which the settlor would not approve.

On the other side of the balance, some planners value the special role of the courts with regard to trusts, and see it as the best assurance that the settlor’s plan will not be derailed – even if it does add to costs.

Perhaps the client needs both options to be offered and explained.

Comparing the usual ‘not for profit’ company

In Cayman law, it has always been possible to form a company for special purposes and to include in its memorandum of association a clause prohibiting the payment of dividends to members as such. In some situations, this can work well, especially if the objective is charitable or will be achieved while the founder is alive. But otherwise it suffers significant drawbacks – which the Foundation Companies Law seeks to overcome. It does so by modifying (in relation to foundation companies) the relatively few provisions of the Companies Law that put the members in the driving seat. For example:

  • The constitution of a foundation company may entrench its objects, or impose conditions for amending them. The founder need not worry that one day members may derail his plan.
  • The founder may also entrench other provisions of the constitution. Powers of amendment or consent may be given to non-members.
  • If the constitution so provides, a foundation company may dispense with members altogether.
  • The founder may provide in the constitution for supervisors to keep an eye on the directors, or exercise any of the functions normally performed by members.
  • The constitution may grant rights, powers and duties of any description to the founder, the directors, the supervisors, the members or whomever else the founder wants. Complete flexibility.
  • The statutory contract binding a company and its members to the constitution is extended in the case of a foundation company to all persons to whom the constitution gives rights or powers.
  • If the objects of a foundation company include the giving of benefits to family or others, it is up to the founder to say in the constitution whether the beneficiaries are to have rights. The default rule is that they have none.
  • A foundation company may have bylaws to guide the exercise of discretion by directors, supervisors and other functionaries. This is not a public document.
  • The founder has the option of imposing an obligation upon the company itself to carry out the stated objects, but he must designate the persons who will have standing to bring an action against the company to enforce this obligation. A company which has such an obligation will have the same access to the court as a trustee to seek directions.

Comparing the common law foundation

Cayman has not followed St. Kitts, the Bahamas, Jersey, Isle of Man, Guernsey and other offshore centers which in recent years have created new legal creatures emulating in some respects the ancient civil law foundation. It seemed better to us to modify the well-known company, rather than create a whole new set of rules to govern the new creature from A to Z, rules that would presumably take years for the courts to construe thoroughly.

In some cases, the offshore legislation for foundations has apparent defects but in the best of them there are still points of uncertainty – inevitably so.

Most of the offshore legislation seems to suffer from other particular drawbacks:

  • Restrictions on the activities of the foundation;
  • Inflexibility in terms of who owes duties to whom; and who has access to the court;
  • Wishful thinking that foreign courts and tax authorities will accept the statutory proposition that the foundation is not a trust – even when there are beneficiaries who are statutorily entitled to benefit and who have access to the courts to compel due administration.
  • Litigation risk, which is enlarged (even compared to a trust) by giving more people access to the court.

The Foundation Companies Law includes a model form of constitution, to give examples of the arrangements that can be made.

Cayman vies to lead blockchain, digital ID innovation

The implicit promise of quiet relaxation that comes with retirement has been far from the reality for former Equifax CEO Richard Smith.

The fallen executive’s career came to an abrupt end in September following a security breach that implicated the personal data of more than 145 million Americans.

During the first of four Congressional hearings in early October, Smith blamed the massive attack on human and technological error. Failure to install a software patch, brought to the attention of the company in March by the Department of Homeland Security, ultimately left millions of consumers vulnerable.

“As we all painfully learned, data security is a national security problem,” Smith told lawmakers.

He argued no single company can solve data protection problems. Smith proposed instead a system that would return control of personal data to consumers.

The ability to do just such a thing – return control of personal data to the individual – has been top of mind for financial services professionals in the Cayman Islands.

As the territory works to implement its new Data Protection Law – and with it, penalties for noncompliance – the Equifax case provides a startling look at the potential fallout for business leaders.

“The Equifax scandal is terrifying because here you have a central depository filled with highly sensitive data, which is hackable and it doesn’t matter how good the data protection laws are,” said Peter Colegate, senior associate for law firm Appleby.

“You can have fines and prison sentences and enforcement penalties to get people to (comply) but ultimately, if somebody is so determined to acquire this data, they can.”

Colegate and his colleagues believe blockchain technology could provide a revolutionary solution for data protection.

Through a distributed ledger system, blockchain eliminates the need for a central database or central administrator, substantially diminishing the risk and impact of a hacking event.

“I think one of the beauties of blockchain is the Equifax thing becomes impossible. There is no central database. Everyone potentially can retain their own documents or the documents themselves can be hashed so they are being shared between the people who need to see them,” Colegate said.

Digital identity

Appleby counsel Samuel Banks envisions a three-stop process to put the Cayman Islands on track to lead the region and offshore centers in blockchain services for financial and personal use.

The first step, a digital identity registry, is already under way. If successful, the initiative would transform the way personal documents are processed and accessed in the Cayman Islands.

Forms such as birth certificates and business registrations would be digitized by the registrar and added to an individual’s “digital wallet.”

“Why not, simultaneous with them issuing physical versions of these documents, have them issue a digital identity as well? That digital identity, because it is issued by the authority, it is irrefutable proof of existence of identity. That can be incorporated into the individual’s digital identity and be carried with them throughout their life, much like a birth certificate would be,” Banks said.

Notarized, personal documents would be stored on a token, a sort of digital widget, with the protection of private and public key codes.

“They are access devices to obtain services on a network. If you, for example, need to prove your identity, you may purchase a token that you can use as a way of communicating digital information about your identity. It can also be used to exchange for services on the network,” Banks explained.

Appleby is currently working with Cayman Finance and other relevant parties to establish the system, which could launch as early as mid-October.

Cayman Finance CEO Jude Scott said a cross-sector working group including the Ministry of Financial Services and the Cayman Islands Monetary Authority has been active in developing FinTech that will complement Cayman’s business model.

CIMA declined to comment on blockchain development. A spokesperson, however, confirmed that it is currently evaluating its regulatory approach to such innovations.

“While the Authority appreciates the various potentials associated with FinTech, we need to ensure that the risks to our various stakeholders are understood, managed and appropriately mitigated,” a CIMA statement said.

Establishing CIMA’s regulatory role over the system – and the broader digital economy – will be the next step.

The authority must recognize digital tokens as a valid proof of identity in the context of anti-money laundering compliance for the initiative to work, Banks explained.

“Once CIMA is comfortable with that, it’s licensees can get comfortable with that because now the licensees have an incentive to try to go out and incorporate these processes into their business plans because they know the country’s central regulator lends credence to it,” he said.

The final step will depend on government to establish a regulatory framework flexible enough to adapt to a rapidly evolving technology while still implementing sufficient oversight.

While the legislative future remains unclear, Colegate said Cayman sits in an ideal position to spearhead blockchain innovation.

“Cayman has got the will and it’s certainly got the people here who want to push FinTech. It would make perfect sense for Cayman to be a FinTech hub. It’s very attractive, not just to be a hub, but also as place where tech companies and entrepreneurs can base themselves to develop some of this stuff,” Colegate said.

“My fear is that if Cayman doesn’t take advantage of it, there are plenty of other people vying to be the FinTech hub in the region. Whoever gets there first is going to get the advantage.”

Establishing Cayman as a FinTech leader

If Cayman moves quickly enough to lead such innovations, blockchain technology could be a boon for the financial sector by improving speed and efficiency of services.

Setting up a bank account, an often long and complicated process in the Cayman Islands, could be streamlined, for example, by eliminating wait times to process paper documents. Cayman could also get a leg up on implementing smart contracts, governed by preset conditions established and enforced through a blockchain network.

“Smart contracts need a governing law. That governing law should be the Cayman Islands because it has the most robust framework and regulatory environment for the interpretation and recognition of smart contracts,” Banks said.

“That is going to bring comfort to the market participants because they know when they choose Cayman Islands law, they are choosing a body of law that is well-developed, established and hopefully has the proper framework in place to facilitate blockchain commerce and a court system that is well-appointed, competent and familiar with financial services cases and that can gain familiarity with blockchain.”

While blockchain’s reputation as the “Wild West” of the internet may give pause to some regulators, Colegate argues this is a misperception that can be overcome through proper education about how the networks operate.

“Actually, you can have a closed, permissioned network, if you like, with a set of governing rules and all the things you would expect to see in a normal, regulatory environment can be built into that network and into that chain,” he said.

“On blockchain, you’re not subject to some of the unknowns that you have in the real, paper world. I think a big part of it, in terms of getting regulators on board, is getting them to understand its capabilities in a safe environment.”

Banks described the networks as similar to a corporate intranet, connected only among authorized users.

“I think a good, analogous way of looking at that is looking at the internet as a whole and then small, individual corporate intranets. They work in generally the same way. It’s just a question of who can access them and what can be done on them,” he said.

Much like the internet, Banks foresees blockchain disrupting the tech world for the better.

“I don’t think there’s fear. I think there’s excitement, like anytime you have a disruptive technology. The internet was one such technology. No one could have imagined Facebook or even Google when the internet was first developed,” he said.

“[Blockchain] gives you the opportunity to actually use the power of the Internet to its full commercial potential. So when you look at the technology that has that potential and then ask where it will be in the future, it’s like looking into the sun because who can know such a thing. 

Lessons from Ivan: BVI financial sector faces long road to recovery

Damaged boats lie in Road Town harbor, Tortola, British Virgin Islands, after hurricane Irma. – Photo: AP

After Hurricane Ivan ravaged the Cayman Islands on Sept. 11-12, questions persisted for days about whether the island’s financial services industry would also be devastated.

“Would the fifth largest banking center in the world be able to recover?” states a Sept. 24, 2004 article in the Cayman Compass. “A worldwide rumor mill began turning and by the end of that fateful weekend, many thought they had heard the last of the small, affluent island.”

Luckily for the territory, business was largely restored within weeks, with many industry practitioners touching it out and working in their air condition-less offices, and others working from abroad. Now, Cayman regularly sets new records for employment totals, population, and other economic indicators.

Roughly 1,100 miles east, another Caribbean offshore financial jurisdiction faces a similar question as what was posed to Cayman 13 years ago: Will the British Virgin Islands, which was devastated by Hurricane Irma, be able to maintain its position as one of the world’s major offshore financial centers?

According to industry professionals, some factors such as technological advances are working in the BVI’s favor, while other factors such as the severity of infrastructure and housing damage are working against it.

Better record-keeping systems is one major advantage firms have now that they did not in 2004.

When Baker Tilly insolvency lawyer Hadley Chilton arrived in Cayman in Oct. 2005, he said he heard stories about paralegals microwaving water-logged documents in order to save them from being destroyed. Kevin Butler, a partner at the Cayman office of Conyers Dill & Pearman, said that in 2004 his firm’s records were backed up on tapes, which had to be transferred to its Bermuda offices a week after Ivan in order to recover the Cayman records.

With more advanced electronic record-keeping systems, the risk of losing corporate and legal records should not be an issue for BVI firms, said Butler.

In this Sept. 8, 2017 photo, people walk near debris in the aftermath of Hurricane Irma in Tortola, in the British Virgin Islands. Britain sent a navy ship and troops to help people on the British Virgin Islands, Anguilla and the Turks and Caicos islands that were pummeled by the hurricane. – Photo: Gabi Gonzalez via AP

Enhanced information technology has also allowed BVI company formations – the territory’s primary financial service – to continue largely uninterrupted. Within days of Irma, the BVI Financial Services Commission announced that its online portal was back up and running, allowing firms to incorporate companies and make regulatory filings.

“Our financial services business was built to allow people to do BVI business from anywhere in the world, and to continue business regardless of the physical conditions in this jurisdiction,” stated a Sept. 11 announcement from Elise Donovan, the head of the Hong Kong-based BVI House Asia. “BVI has proven success with, and continues to be the go-to jurisdiction for, Asian and Chinese foreign direct investment. More than 40 percent of BVI corporate vehicles are owned and used successfully by Asian business leaders and high net worth individuals.”

Contrast that quick recovery with Cayman’s Companies Registry, which was offline for weeks after Ivan. By Sept. 24, 2004, government announced that the Registry was in service “for new companies only.”

“The Registry team intends to work on the weekends to deal with the backlogs of registrations interrupted by Hurricane Ivan,” states a Compass article from the time. “Further information will be provided as the service capability of the Registry expands to pre-interruption levels.”

Being able to do business remotely is essential for the BVI, as nearly a quarter of its population has been displaced and more than 4,000 homes destroyed.

Cayman was more fortunate, according to Mr. Butler, who said that most Conyers employees remained on island in 2004.

Similarly, BDO Managing Partner Glen Trenouth spent about three weeks in the BVI before returning to Cayman. His employees soon followed him, he said.

“Not only are many of them staying on island, but they have opened the doors of their offices to house outside corporate peers,” states an Oct. 1, 2004 Compass article. “Maples is accommodating two other law firms and a bank… [Then-Deputy Financial Secretary Ken] Jefferson said the search is ongoing for similar arrangements for other government departments.”

When the hundreds of industry practitioners who left the BVI could return depends on how quickly the territory can rebuild its thousands of flattened homes, repair its infrastructure, and restore other essential services.

To that end, BVI officials have been working furiously to return the territory to normalcy.

The most vital social service – law and order – has been restored, with BVI police, U.K. military, and a group of 16 Cayman police officers helping round up the roughly 140 escaped prisoners and arresting people who looted after the storm.

School also resumed on Oct. 2, and internet has been restored on much of the island. Government is aiming to have power back up throughout the territory by mid-December at an estimated cost of US$48 million.

Still, commercial airlift remains limited, with no flights taking place during the night, and the BVI Commercial Court is expected to be located in St. Lucia until at least mid-December.

Mr. Butler said it could be six months or more until Conyers’ BVI employees return. He added that Conyers’ BVI office is relatively unscathed compared to other firms, but is currently being used to house U.K. military personnel.

Policies that could speed up the rebuild include implementing tariff reductions, streamlining work permit and business licensing processes, and instituting prohibitions against price gouging, Mr. Butler said.

On Sept. 21, the BVI government took one of those steps, waving duties for building materials, food and water, generators, pharmaceuticals, and furniture and other household goods.

Mr. Chilton, who lived in Cayman from 2005-2008 and is now based in the BVI, added that government is reviewing its immigration policies to make it cheap and easy for incoming construction laborers and other workers to obtain temporary work permits.

The BVI would be best served to emulate other Cayman policies that make it relatively easier for non-citizens to obtain permanent residency and open businesses, he added.

“There are people who’ve lived here for 10 to 20 years and still aren’t permanent residents,” he said. “We might want to revisit that.”

But even if the BVI does everything properly, its financial sector will still be largely dependent on the performance of the global economy, he said. That could be bad news for a territory that has seen new lows in incorporation rates since over the last year, and has had the number of companies registered there roughly cut in half since the 2008 financial crisis, from around 800,000 to less than 400,000 at the end of the second quarter of 2017.

“Cayman had momentum. Ivan was three years before the 2008 blowup,” he said, adding, “I think it’s a bit too early to tell [for the BVI]. We definitely don’t have booming economies around the world.” 

Cruise lines weathering the storm

Evacuees line up to get on a cruise ship on Sept. 28 in the aftermath of Hurricane Maria in San Juan, Puerto Rico. - Photo: AP

Hurricanes Irma and Maria disrupted many sectors of the economy but none more so than the cruise industry. The shares of major cruise line operators Carnival, Royal Caribbean and Norwegian Cruise Line faced significant headwinds in September.

Still, most cruise lines appear to have weathered the financial hit of the storms.

After dozens of canceled, diverted or delayed cruises affecting half of its fleet, Carnival Corp., the company with the most ships in the region, said in September that Hurricanes Harvey, Irma and Maria would hit per-share earnings by 10 cents to 12 cents in the fourth quarter of its fiscal year.

Seven destinations in the Caribbean – St. Thomas and St. John (U.S. Virgin Islands), St. Maarten, St. Barts, Barbuda, Tortola (British Virgin Islands), San Juan (Puerto Rico) and Grand Turk Islands (Turks and Caicos), and Dominica – remained closed.

However, more than 40 ports in the Caribbean are fully operational, including the ports in the southern and western Caribbean.

“We have not experienced lots of cancellations. Cancellations are running at around 1 percent,” said Carnival Chief Executive Arnold Donald in the company’s third-quarter earnings call.

Meanwhile, Carnival’s bookings for the first half of 2018 are ahead of this year, both in terms of price and occupancy.

Mr. Donald said the affected destinations should be up and running before the end of the year. The company mainly replaced eastern Caribbean ports affected by the storms with western Caribbean destinations. Stops in Grand Turk were diverted to ports in the Bahamas.

Royal Caribbean’s customer refunds ranged from 25 percent to 100 percent depending on the disruption customers faced. The company also offered 25 percent to 50 percent credits for future cruises.

Royal Caribbean CEO Richard Fain said in an interview with Yahoo Finance that the company cannot forecast storms “but we’re resilient and frankly we go to some 450 destinations around the world, so we’re able to mix and match. [Irma and Maria] seemed to be particularly well-pointed at us. So every port that we went to in the Caribbean got some of the harm. But fortunately we were able to make some adjustments. And we’re a strong enough company to move on,” he said.

Some analysts even believe the recent sell-off in cruise company stocks represents a buying opportunity. Cancellations and route changes due to the hurricanes were “insufficient to derail strong trends” in the cruise industry, Wedbush analyst James Hardiman said in a research note in September.

“August pricing remained strong, and although the two major hurricanes are likely to be material to numbers, the impact should be short-lived,” he said.

“We see the resulting sell-off in the cruise space as an opportunity,” Hardiman added.

Both Royal Caribbean’s and Carnival’s shares had climbed continuously before August, but then took a dive after Irma and Maria disrupted their service. Royal Caribbean’s stock recovered at the end of September trading just below its Aug. 31 high. Carnival’s stock traded about $4 below the shares’ $65 peak at the end of August.

Despite the hurricanes, the cruise industry is growing overall. Shipyards that specialize in building cruise liners are fully booked until the middle of the next decade. The impact of the storms on the cruise companies was also not as hard as it could have been. The companies’ home ports remained unaffected, with the exception of San Juan, Puerto Rico, but Carnival positions just one Fantasy-class vessel there. And despite the devastation in some of the eastern Caribbean destinations, alternative ports were operational and available.

In addition, September is considered low season in the Caribbean and The Bahamas. Companies such as Princess Cruises, Holland America and Celebrity Cruises route most of their ships in other parts of the world during that time. Royal Caribbean has eight of its 24 vessels in the region at this time of the year, and Carnival has 20 ships in the Caribbean.

Cruise lines aid Caribbean islands

The cruise industry expanded its aid efforts in the Caribbean in the wake of Irma and Maria.

Royal Caribbean dispatched one of its 24 vessels to Puerto Rico, St. Thomas and St. Croix on a humanitarian mission. The Adventure of the Seas delivered supplies to the region and evacuated 3,800 people to Fort Lauderdale.

Both Caribbean and Norwegian Cruise Line also sent vessels that were available after cruise cancellations to St. Thomas and St. Maarten to deliver relief supplies and evacuate stranded travelers.

In addition, cruise lines are transporting relief supplies for affected islands on Florida-based ships that were heading to the Caribbean on regular sailings with passengers.

Carnival Cruise Line used 11 ships to deliver water, food, clothing and other critically needed items to several affected islands in the Caribbean.

Following the storms, Carnival Corp., together with the Miami Heat Charitable Fund and the Micky and Madeleine Arison Family Foundation, pledged up to $10 million for relief and rebuilding efforts in the Caribbean and Florida.

“Be assured, we will continue to bring many resources to bear for those impacted [by Irma and Maria] by providing ongoing help and support in the coming months,” Carnival’s CEO Donald said after the company’s quarterly conference call with Wall Street analysts in September.

Royal Caribbean Cruises, the parent company of Royal Caribbean and Celebrity Cruises, has pledged to match donations of up to $1 million that aid hurricane relief efforts. Norwegian Cruise Line’s parent company has made a similar pledge to match donations of up to $1.25 million. Norwegian’s sister line, Oceania Cruises, said it would donate $500 per cabin to hurricane relief efforts for each new booking on select Caribbean voyages sailing from December 2017 through April 2018.

Royal Caribbean’s Fain believes that the islands will eventually recover. “What we really want to do is see the strength that the cruise industry and tourism bring to these islands,” he said. “Tourism can be one of the strongest contributors to these economies going forward. We intend to be part of that.” 

 

A solution for de-risking?

Government officials and industry professionals have long stressed the importance of regulatory compliance for their firms and for the wider financial services industry in the Cayman Islands.

But in places like the Caribbean, the stakes are even higher than that: One non-compliant firm or individual can tar the entire region with the same bad reputation, according to Adrian Sanchez, the director of LexisNexis’ financial crime compliance solutions in Latin America.

That has indeed been the case in the banking sector, with the region’s reputation for drug trafficking and money laundering leading to major international banks limiting their operations here or pulling out altogether – a phenomenon known as “de-risking.”

De-risking has been on the increase in recent years, impacting the Cayman Islands and other Caribbean financial jurisdictions.

Government officials here attribute the continued decline in the number of Cayman-registered Class B banks – which are restricted to conducting business offshore with non-residents – to the fact that they are unable to secure correspondent banking relationships with global banks. The problem has been reported in the British Virgin Islands, too, with at least 11 Panamanian trust firms having their BVI offices’ accounts closed by a major international bank after the Panama Papers scandal.

In total, about 75 percent of the world’s largest banks have engaged in de-risking in the Caribbean, Sanchez said at the 13th annual Anti-Money Laundering/Compliance and Financial Crime Conference on Oct. 2-3.

This has had a widespread negative impact on regional trade, remittances, charity, and other services that require the use of the banking sector, he said.

By limiting credit to potential entrepreneurs, it is also hampering innovation, added the financial crime expert.

“Many financial institutions have been turning away customers because of their KYC policies, and this has been particularly affecting small businesses because they are not able to comply with strict KYC policies, and therefore they’re being denied access to credit needed to expand their businesses,” he said.

Moreover, the irony of de-risking is that by limiting access to reputable international banks, it has made the region more susceptible to money laundering.

“If de-risking goes to an extreme, we could have a surge of cash-flowing activities, because all that money still needs to be moved somehow. And we could see a return of foreign currency and exchange black markets,” he said, adding that potential wrongdoers could also seek “other options such as smaller banks or credit unions, which don’t have the same infrastructure as large banks, and don’t have the same oversight. All these high-risk customers will be moving into less-regulated entities.”

But for all the handwringing over de-risking, Caribbean government have put forth few suggestions on how to solve the problem. At the conference, however, Sanchez said that the banking industry is working to come up with a solution.

However, such an initiative would require changes to international regulations in order to allow banks to share their clients’ information.

Adrian Sanchez

“We need to work with regulators and lawmakers,” said Sanchez.

In the meantime, a global bank that figures out an efficient and inexpensive way to manage risk could capture markets like the Caribbean and rake in huge profits, he said.

Right now, the profit incentive is not strong enough for banks to devote significant resources to examine risk in the region on a case-by-case basis.

However, banks are coming under increased pressure from regulators to resist engaging in de-risking.

“They’re telling them de-risking is not in line with international standards. So banks are being torn between conflicting expectations,” said Sanchez. “On the one hand, regulators are telling them to scrutinize their clients, but on the other hand, they’re also urging them to completely walk away from high-risk areas or industries.”

Along with regulatory pressure, banks are also receiving negative feedback, and could be risking a class-action lawsuit or a discrimination claim by those who are excluded from the banking system. If those risks become serious enough, banks will have the proper incentive to find ways to manage their risk.

“There are no silver bullets, this is a very complicated topic,” said Sanchez. “But if we can work together – banks, regulators and lawmakers – the cooperation between stakeholders can clarify regulatory expectations and what the current needs of a specific region are, and we can work towards a specific solution.

Armour Expo: Weather and IT are inseparable for Caribbean businesses

Cybersecurity trends are discussed at one of the Armour Expo panel discussions. - Photo: Kayla Young

In the wake of a devastating hurricane season, much of the Caribbean has been forced to take on massive rebuilding efforts in coming months.

While homes and buildings sustained the most visible damage, digital infrastructure and computer systems suffered as well. As businesses rebuild on the ground, the ever-present threat to digital assets remains.

During a rainy September day, cybersecurity professionals in Grand Cayman were reminded of the Caribbean’s innate relationship between weather and IT. Much like hurricane contingency plans, cybersecurity readiness can make or break businesses.

Speaking from eShore and Optiv’s first Armour Expo, Duncan Card, managing principal of Canadian law firm

Bennett Jones made the case for renewal and modernization of cybersecurity systems as part of hurricane recovery efforts.

“It’s reminded us how dependent we are now on modern security infrastructure, whether that’s buildings, sewage, water delivery, transportation, communications. I can see all new standards coming out for rebuilding,” Card said at the Grand Cayman Marriott Beach Resort.

“I think there is a real opportunity now for that. I think of intelligent infrastructure, like intelligent airports and intelligent police, emergency support services, intelligent hospitals that are built to different safety standards.”

Much like South America, which lagged for many years in telecommunications, the Caribbean has an opportunity to start fresh and implement state-of-the-art infrastructure, he said.

Card, a native of Cayman who is based in Bermuda, proposed that government pursue private-public partnerships to spearhead projects and drive capital into recovering jurisdictions.

He pointed to the recent success in establishing a public-private partnership in Bermuda to build a new airport. The British government issued an entrustment letter to move the project forward and Bennett Jones provided legal support.

Duncan Card

“These are structures that bring international capital to the jurisdiction. They use their money to build infrastructure. The infrastructure will be owned by the governments. [Contractors] are allowed to operate it on a long-term contract under concession of government, until that investment has been reasonably recouped,” Card said.

While debt and poor credit ratings may complicate financing in many jurisdictions, much of the region can look to its European and North American counterparts for support.

“A few of the jurisdictions can rely on other countries to help them financially with loans or grants,” Card said. “England might be helping the British Overseas Territories. The United States will be helping Puerto Rico. France and Holland, obviously [will be] in the French and Dutch territories.”

The disasters may also serve as a reminder to onshore entities of their investments offshore. As businesses work to strengthen digital security, executives must remember to extend policies across jurisdictions.

“They’re forgetting about their subsidiary corporations, affiliated corporations that are offshore. They are forgetting they may have an investment offshore where they only own 40 percent and not 60. But because they only own 40 percent, they may not be imposing the same standards or conditions on the subsidiaries,” Card said.

“My own view is that the offshore world, except for some financial institutions, is lagging behind.”

Connectivity across the region can also ease the immediate needs of affected businesses, said Pamela Webster of Armour Expo organizer eShore. Hurricanes Irma and Maria have reinvigorated the cybersecurity company’s core purpose: disaster recovery.

“We started 13 years ago after Hurricane Ivan as a disaster recovery company and we’ve gone back now to our original purpose,” Webster said.

She said clients in the British Virgin Islands were able to get back to business rapidly, in part due to data backup centers and support software.

“We have at least a dozen people here that have an office in Tortola, BVI, and they are all running. We’d like to thank a lot of data backup centers and our software as a service. But there has been no financial impact for our financial customers in Tortola,” she said.

From cyberattacks to natural disaster, Webster said the takeaway for businesses should be preparedness.

“You can’t be complacent. You have to be always changing, always adding, always switching,” she said. “I think Cayman is leading the Caribbean in preparedness. We can always do better, however. It is an attractive place for hackers because it is easy for them blend in. … It’s regionwide.

Today it will be Cayman. Tomorrow it will be Bahamas. Next week it will be Barbados and at the end of next Tuesday, it will be Bermuda.”

Security solutions manager Tracey Patino from eShore said business budgets are slowly beginning to reflect the importance of cybercrime.

“Even three or four years ago, it wasn’t part of a business continuity plan. Nobody thought about budgeting for cybersecurity. Why would you?” Patino said.

“Now all of a sudden, companies are thinking, wow, I have to put cybersecurity as part of my IT budget because it’s now become a part of the business continuity plan. It’s crucial for their business even continuing to run.”

The key for businesses will be to address cyber-threats from the top down, Card added.

After all, when a major hack occurs, like the recent breach at Equifax, CEOs and not IT staff are the ones expected to contend with shareholders and the media.

“The cybersecurity threat is enormous to the world economy and stability. This has to be addressed from the top down, from shareholders, to boards, from the C suite down,” Card said.

 

Living securely in a digital world

Anthony Giandomenico

Anthony Giandomenico

Over the past several months the news has been full of reports about cyber criminals using malware to shut down devices or networks, steal data, or hold it for ransom. During the second quarter of 2017, more than 184 billion total exploits were documented. While most of these attacks targeted large, commercial networks, there has also been a large spike in such activities targeting the devices and data of individual users.

Some of these attacks, like having your Facebook page hijacked, are often used to collect the personal information of you or your online friends as part of an identity theft operation. At the same time, we have also seen an increase in malicious applications that mimic legitimate websites such as banks, healthcare providers or other online services. Such malware is designed to steal your personal or financial information.

Last quarter also saw the continued growth of ransomware attacks targeting hospitals or financial services organizations. But we have also seen huge growth in such attacks targeting individual users. Most ransomware attacks are delivered as a malicious file attached to an email. Once clicked on and activated, they can encrypt your hard drive and hold its data for ransom.

A new family of attacks has also begun to target the wide range of online devices in your home, such as gaming systems, smart TVs, digital security cameras, and even smart appliances that connect to the internet through your home WiFi system. Cyberattackers target a wide range of known vulnerabilities in these devices in order to control them remotely, collect your data, or install malicious code that allows attackers to aggregate millions of similarly compromised devices into huge cyber weapons known as botnets. They are used to generate huge volumes of data traffic that can overwhelm and shut down targeted online organizations or cripple Internet traffic.

Of course, the big question many folks are asking is, “What can I do about this?” Fortunately, there is a lot that can be done. Here is a short list of four things you can do right now to make your home and online experience safer.

Control social media

Cyber criminals often set up fake pages or accounts and then request that you add them as a friend, hoping to steal data or trick you into clicking on links to infected sites. Always look at the home page of the person making the request. When was it set up? What year do they claim to have graduated from college or started their new job? Can you see photos of normal activity or does their page seem to mostly be of seemingly image database photographs? If the person making the request is someone you know, check to see if he or she has friends in common. Look at their vital information. If you still have doubts, contact them directly to see if they built a new page. If not, their account has been hijacked or duplicated.

Scrutinize online transactions

The first thing to remember is that banks will never initiate a request to verify your account or provide your login credentials. Such requests, either online or via email, can safely be ignored or deleted. If you do receive an email or a browser page with a link attached, always look at the URL (the web address) before you click it. It should start with a real address, such as “www.(yourbank).com”. Is the logo correct? How about the spelling and grammar? If you have any suspicions at all, log into the site directly or call your financial institution to ensure that the request is legitimate.

Inspect email

The most common way to get users to load malicious software or malware onto their systems is through an email attachment. Here’s the rule: NEVER click on an attachment or web link in an email from someone you don’t know, that you didn’t request, or that doesn’t seem entirely legitimate.

Update devices

This is important, but can also require the most work. It is advisable to make an inventory of the devices in your home that connect to the internet, including phones, TVs, security cameras, home routers and/or wireless access points. Next, query online for known vulnerabilities or patches to ensure these devices and applications are running the latest patches and the most current versions of their operating systems.

We are now living in a digital world, and cyber crime is part of that new reality. We have all learned to lock our cars, deadbolt our doors, look both ways before crossing the street and avoid dark alleyways and streets at night. It’s time to develop the same good habits as we navigate through our digital environment. Just as in the physical world, you can never be 100 percent safe, but if we all just exercised a bit more caution and imposed just a little more security on the tools and applications we use and develop, the digital world we live in would quickly become a whole lot safer. 

ZEDRA is delivering on launch strategy, management says

Tomas Alonso

Almost 20 months after the buyout of Barclays’ trust and fiduciary business and the launch in seven jurisdictions, trust and corporate service provider ZEDRA finally held its official launch party in Cayman in October.

The event was originally planned for last year but business got in the way. First, the rebranding and restructuring efforts took precedent, then the acquisition of Barclays’ UK Trust business took up senior management’s time.

Now, after having moved offices in Cayman, it was finally the opportunity to celebrate the business and to take stock of the first nearly two years.

“We have delivered on our strategy which we formulated at the launch of ZEDRA,” says Ivo Hemelraad, group director Corporate, Funds and Legal.

During that time, the company expanded both its office network and service lines. ZEDRA started out as a private client business in Jersey, Guernsey, the Isle of Man, the Cayman Islands, Singapore, the U.K. and Switzerland.

“That gives us a good background but we thought what we were missing for the more entrepreneurial client was the ability to also deliver corporate services and fund services. And that was also one of the reasons why we expanded into the Netherlands and Luxembourg and places like that,” Hemelraad says.

The company then opened its office in Hong Kong for corporate and trust services and added corporate services to the private client business in its expanded Singapore office.

Ivo Hemelraad

Most recently, ZEDRA opened an office in Miami to cater for the North American and Latin American market. “The idea is to represent the group and sales in the North American and Latin American markets for high net worth individuals, private entities, corporate clients and family offices,” says managing director Tomás Alonso.

ZEDRA’s latest acquisition of Barclays’ onshore trust business in the U.K. was not part of the original strategy but, Hemelraad says, “when an opportunity presents itself, you have to take a look and analyze it and we thought it made sense.

“We are now in the interesting spot that we are a leading trust company in the U.K. as well.”

The company also entered the U.K. property market by offering local property management services, especially for a high concentration of clients that have invested in properties in London.

As an independent trust company that is not owned by a bank, ZEDRA can focus on its role of trustee and outsource other functions like investment services for its clients.

“Because we are not being paid for banking and investment services, we can take a broader perspective and look at all the assets a client has, whereas a bank would only look at whatever is bankable and they can make money from,” Hemelraad notes.

Brian Taylor, managing director of ZEDRA in Cayman, adds that as an independent trustee the firm looks at different asset classes and specializes in those. “That would obviously cover most of the fund space for corporates and private clients, but also property management, marine and aviation.”

Compared to other independent trust companies, ZEDRA can have a slightly different approach.

All of the company’s larger competitors are owned by private equity investors and focus more on profit maximization and realizing capital gains, Hemelraad says. “We can approach it with a longer-term view.

“We have an environment in which we can focus on people, both clients and staff, and that is what delivers at the end the high-quality service, of course supported by systems.”

Taylor adds clients are looking for certainty and security and are a somewhat concerned about private equity ownership because the trust companies might be sold off. “To the extent that we are truly independent and given our history, it allows our clients to know that we are going to be around for the longer term,” he notes.

Name recognition

ZEDRA’s initial challenge after its launch in January 2016 was to get the firm’s new name recognized in the marketplace.

“That is going very well, we have been very active,” says Hemelraad, citing the company being named as one of the top trust companies of the year by eprivateclient and winning the accolades of Citywealth independent trust company of the year and a similar award in Asia.

“That proved we have not only captured the attention but people recognize us for being able to deliver,” he adds.

Most importantly, Hemelraad says, the efforts bear out in the numbers. “It shows in our results, especially the number of new clients, which we are attracting, has more than doubled from last year.”

This client growth is broad-based in all of the company’s operating regions, he says.

Future

The future of the trust business will involve more complex services for growing client needs, ZEDRA’s management believes.

The latest STEP LatAm industry conference showed “an obvious trend toward U.S. trustee services” among Latin America’s private clients, Alonso says. He believes this has to do with the desire to be under a FATCA reporting environment rather than a common reporting standard environment, because clients don’t want the authorities to disclose their foreign assets for privacy and personal security reasons.

“In many countries in Latin America, this type of information easily gets into the wrong hands and becomes a threat to the families,” Alonso says.

Most client families now have international links and are dispersed across different countries. They will need more sophisticated advisers and trustees who understand the international links, the diversification and the next generation’s mindset, he says. “As a result, the types of service are getting more sophisticated, more challenging and interesting.”

Brian Taylor

Taylor notes that clients are also more aware of trust solutions, which 20 years ago would not have been part of Latin American clients’ plans. Those clients are now much more comfortable with trusts and increasingly need structures because families are spread across various countries.

“I think the need for trusts will remain in place for wealthy families. What is going to change is the sophistication of services and how you are going to deliver that to more demanding clients,” Taylor says.

Hemelraad points to the number of millionaires that is still growing, especially in emerging markets, which should benefit service providers like ZEDRA.

In addition, he says, the consolidation in the industry will continue driven by private equity investments and the cost of compliance and regulation which forces trust and corporate service companies to invest heavily into their systems. 

Health forum addresses processed foods, cancer, chronic diseases

Dr. Troy Gatcliffe

The prescription is fascinating, sensible and easy to remember – and it might save your life: Shop the perimeter.

The reference is to the grocery store, and Florida’s “Foodie Physician” Dr. Sonali Ruder and Cayman’s Dr. Kalila Bodden agree: The “perimeter” is where the refrigerators and freezers are – stocked with frozen vegetables, milk, yogurt and other dairy products – and where shoppers will find bins of fresh fruit, vegetables and other produce, and where butchers offer clean cuts of meat and just-caught seafood.

As buyers move toward the middle of the store and its long aisles of shelving, the food becomes progressively more processed – and worse for you.

Doritos and potato chips require little supervision, soda rarely goes bad, candy is secure in its wrappers and processed snacks repose comfortably beside school supplies, paper products and cleaning solutions.

“Shop the perimeter means to stock up on the more nutritious ingredients that are typically located around the periphery of the grocery store,“ says New York City-trained nutritionist Ruder, “and [you can] limit the amount of high-calorie, processed foods that tend to occupy the middle aisles.

“The nutritious items you want to stock up on are things like fresh fruits and vegetables from the produce section – and frozen fruits and vegetables from the freezer aisle – and whole grain breads from the bakery, low-fat dairy products like milk, cheese and yogurt from the dairy section, and lean protein including seafood, poultry and eggs from the meat section,” she says.

“An important group of nutritious foods that we shouldn’t forget about that’s not located in the perimeter is the legumes group,” Ruder adds.

“These products, which include beans, peas, chickpeas and lentils, are usually found in the canned or dried bean section and are an important plant-based source of protein, fiber, vitamins and minerals.”

Dr. Sonali Ruder

‘Food for Thought’

Ruder is this year’s keynote speaker at Cayman’s eighth annual healthcare conference, titled “Food for Thought: Exploring the Relationship Between Nutrition and Health,” staged by the Ministry of Health and 40 partners. The conference, which is free and open to the public, is from Oct. 19-21 at The Ritz-Carlton, Grand Cayman.

In a written introduction to the gathering, Cayman Minister of Health Dwayne Seymour said, “‘Food for Thought’ was of particular importance as we seek to explore the relationship between what we eat and how it can affect our health; the benefits of educating the community on making better choices; and taking control of their health and wellness through better nutrition.”

Ruder, of Fort Lauderdale, will drill down, devoting 45 minutes at the evening opening to “Healthy Eating at the Different Stages of Life,” addressing the relationship between nutrition and health through the different stages of life, and will discuss the emerging field of culinary medicine, “which blends the art of food and cooking with the science of medicine.”

Bodden will speak at 10 a.m. Saturday, under the broad rubric of “mental health,” but with a particular focus on “Junk Food: Fun Food or Toxic Temptress?” which, she says, “will differentiate between healthy and pseudo-healthy foods (foods that are marketed as healthy, but are really just junk food in disguise).

“You will also find out how hyper-palatable engineered food compels you to crave it incessantly,” she says.

Bodden, who stays abreast of the ever-emerging medical research supporting the symbiotic relationship between food and health, echoes Ruder’s observations about grocery store structures. “The ultra-processed foods are in the middle … they don’t need refrigeration. Produce and fresh foods are at the edges.”

Citing the U.N. Food and Agriculture Organization’s NOVA food-classification system, Bodden identifies four levels of industrial processing.

Level 1, she says, is natural, fresh and entirely unprocessed, such as bananas, coconuts, cuts of fresh meat from the local butcher, and dairy from the farm.

Level 2 is slightly more processed, she says, but similar to the first category, such as a store-bought chicken that is baked, boiled or grilled for home or even restaurant consumption, with herbs and seasoning.

Level 3 starts to describe processed foods that have two, three and four ingredients, usually from the first two categories, but processed to be more convenient and more packaged, food ready to fry, Bodden says. “You might eat a salad, for example, but soak it in bottled dressing.”

Level 4, however, is where the real trouble starts. “It’s ultra-processed,” the doctor says. “Stuff like Doritos and Pop-Tarts. They are created as ready-to-eat and ready-to drink, designed as replacements for real food.”

Comestibles at this level are “products,” she says, “brands manufactured to “get you to eat their products.

One way to spot them is if they have a TV commercial.

“Look at the label,” Bodden says, pointing to sophisticated packaging. “They imitate the secondary tactile and taste qualities of level 1 foods, and often have artificial sweeteners and colors, bulking and glazing agents.”

A 2014 paper by a quartet of medical researchers says “NOVA has been successfully applied … in Brazil, Chile, Canada and the UK, and to market data from 79 high- and middle-income countries,” indicating that developed nations are among the worst offenders.

“Studies in Canada and the UK using NOVA have shown that ready-to-consume products, and in particular ultra-processed products, have come to dominate dietary patterns in these high-income countries. The most apparent important factor that has driven changes in Canadian dietary patterns between 1938 and 2011 has been replacement of foods and ingredients used in the preparation of dishes and meals, by ready-to-consume products, mostly ultra-processed,” the authors write.

They detail industrial processing as drying, flaking, hydrogenation, hydrolysis, extruding, molding, reshaping and preliminary frying and baking.

And as the processed food industry researches “mouth feel” for its products, Springer describes them as “durable, convenient, accessible, highly or ultra-palatable, often habit-forming and typically, not recognizable as versions of foods.”

An all-too-familiar list

The authors provide a list – lengthy and familiar: cakes, biscuits, breads and breakfast cereals; French fries, burgers and hot dogs; margarines; desserts and “energy” bars; carbonated cola, “energy” and “fruit” drinks; numerous baby products; and “health” or “slimming” products such as powdered or “fortified” meal and dish substitutes – and that’s only partial.

A sure sign of ultra-processed food, Bodden says, is ingredients “you would never have in your kitchen.” Springer names “stabilizers, emulsifiers, solvents, binders, bulkers; sweeteners, sensory enhancers, colors and flavors.”

Read the packages, the doctor intones. “If they say ‘enriched’ or ‘fortified,’ it means the food has been stripped of nutrients and chemically replaced. If it says ‘healthy,’ well, why say it?

“Look for red flags. If something has more than five ingredients, what are they? If a fifth-grader cannot pronounce them, then it’s probably ultra-processed,” she says.

Background

Ruder, whose medical degree sits alongside her certificate from Manhattan’s Institute of Culinary Education, did an emergency medicine residency at St. Luke’s-Roosevelt Hospital Center in Manhattan, followed by an emergency ultrasound fellowship at the Jacobi Medical Center in the Bronx, New York, where she worked for seven years.

“While I was in school, I worked in the ER during the day and attended the [culinary school] at night,” she says. “I loved culinary school. I started my blog, ‘The Foodie Physician,’ while I was a student.” She is currently seeking a nutrition certificate from Tufts University, working online from her Florida home.

Combining her training as doctor and chef, she developed a personalized version of “culinary medicine,” initially taught in 2013 at Tulane University’s medical school.

The objective, she says, is to help patients consume “high-quality meals that help prevent and treat disease and restore well-being.

“As doctors, we can counsel our patients to ‘eat healthier,’ but what does that really mean? If physicians are trained how to make healthier food choices in and out of the kitchen, then they will be better able to counsel their patients about it.”

In the ER, Ruder confronted junk food’s long-term chronic consequences: “The most common ones I encounter are Type 2 diabetes, hypertension, chronic respiratory diseases, heart disease – heart attacks and stroke – and cancer.

“Lifestyle factors such as poor diet, lack of physical activity – kids are on their phones all day now instead of playing outside like they used to – and smoking play a significant role in the development of these diseases.”

Ultra-processing, combining “hidden sodium, sugar, and fat, and sugar-sweetened beverages like soda and energy drinks …” and growing portion sizes in restaurants, means “you can see why obesity and all of the diseases that go along with it are on the rise.”

And that Ruder says, is why one of her “most important healthy-eating tips is to cook at home.”

Cancer link in the Caribbean

The cancer link may top the list of Caribbean fears, according to Troy Gatcliffe, part of the gynecologic oncology team at Miami Cancer Institute at South Florida’s Baptist Health.

He will address the conference at 9:30 a.m. Friday, speaking on “The Big C – The link between diet, obesity and cancer.”

Gatcliffe will tell the conference that research suggests a Western diet, rich in meat, dairy and processed foods, refined sugar, salt and oils, is linked to higher incidences of cancer, although he carefully adds that ongoing studies efforts seek to confirm that.

But, he notes, “The healthiest populations of people around the world, with the lowest rates of our leading cancer killers (lung, colon breast, etc.) eat very little to none of these foods.”

Statistics from the World Cancer Research Fund, he says, indicate “that about 20 percent of all cancers diagnosed in the U.S. are related to body fatness, physical inactivity, excess alcohol consumption and/or poor nutrition.”

Noting that these factors, all related, mean the cancers could also be prevented, Gatcliffe says, “Body weight seems to have the strongest evidence linking it to cancer. Excess body weight contributes to as many as one out of five of all cancer-related deaths.”

Gatcliffe relies on the traditional body mass index developed in the early 19th century by Belgian mathematician Lambert Adolphe Jacques Quetelet. A sort of grid, the BMI plots height against weight, differentiating by gender and making little allowance for proportions of bone, muscle and fat in the body.

Nonetheless, he quotes a 2012 U.S. study using both BMI and cancer-incidence data which estimated that 28,000 new cases of cancer in men and 72,000 in women that year were due to overweight or obesity. Figures from a 2017 American Cancer Society study state that “about 1.1 million new cases and 600,000 cancer deaths are estimated to occur annually” in the Caribbean and Latin America.

Prostate cancer, he says “is the leading cause of cancer death among males, with approximately 51,000 deaths annually, followed by lung and stomach cancer.”

Dr. Kalila Bodden

While mortality also follows long-established patterns of association with economic development, infectious agents and racial/ethnic origin, Gatcliffe cites “obesity and overweight [which] are on the rise throughout Latin America and the Caribbean,” where problems are particularly prevalent among women and children.

Figures from the Food and Agriculture Organization, the Pan-American Health Organization and the World Health Organization indicate close to 360 million people – 58 percent of the region’s inhabitants – are overweight, with the highest rates in the Bahamas (69 percent), Mexico (64 percent) and Chile (63 percent).

‘Alarming’ child obesity rates

Calling them “alarming,” Gatcliffe details childhood obesity rates in the Cayman Islands: “The latest statistics reveal the alarming extent of this problem, and in Cayman alone, one in five children are overweight or obese before they start primary school. By the time they leave, this increases to almost one in three.

“It is therefore essential that we tackle both childhood and adulthood obesity to prevent cancer. As obese children are more likely to grow into obese adults, and obese adults are more likely to develop cancer.”

Echoing the sentiment, Bodden observes that “children grow up with this,” turning into adults, meaning the problem crosses “all demographics.”

Prevention – particularly in less-developed countries – is not simple, relying on half-a-dozen elements: health programs and cancer prevention and screening strategies; feeding research regarding socioeconomic status and current situations. Public education, including anti-smoking and tobacco control, are another weapon, as are awareness campaigns regarding early detection.

“From a dietary perspective,” Gatcliffe says, “education campaigns should also be implemented, highlighting the importance of healthy eating and reducing obesity, within the socioeconomic boundaries (i.e., access to healthy nutrition) of the general population.)”

Conclusions

That dietary perspective forms the “food for thought” conclusions by Bodden, Ruder and Gatcliffe.

“Personal responses can be a challenging pill to swallow,” Bodden concedes, offering five words: “empower, educate and get inspired.”

“If you can make even a 1 percent improvement, you’re winning,” she says, advocating education at home and school, for children and adults, who can pass along habits of “eating from level 1 and level 2.”

It’s simple enough, she says: “Make a personal decision not to eat Pop-Tarts at breakfast and frozen pizza at dinner. It can be transformational when people take responsibility and make changes.”

Gatcliffe says chief among the factors contributing to overweight “has been changes to dietary patterns. Economic growth, increased urbanization, higher average incomes and integration of the region into international markets have reduced the consumption of traditional preparations and increased consumption of ultra-processed products.”

Those traditional preparations tend to include “whole foods” that are cooked slowly and provide nutrients such as fiber, vitamins and minerals with low added sugar and fat.

He holds out hope: “As the population has become more aware of the dangers of processed foods, I believe that there is now a shift back towards ‘traditional foods,’ particularly evident with the emergence of organic farming that does not rely on chemicals, and the farm-to-table practices that are being introduced into restaurants, etc.”

The concept of traditional/whole foods inevitably spills into discussion of traditional diets – rice and fish in Cayman and the Caribbean, the Philippines and Japan; rice and fish or pork in China; rice and legumes in India.

Ruder cites the 2005 National Geographic cover story by Dan Buettner, “The Secrets of a Long Life,” which denotes five “blue zones,” geographic areas where people statistically live the longest: Japan’s Okinawa, Italy’s Sardinia, Costa Rica’s Nicoya, Greece’s Icaria and California’s Loma Linda, home to a significant Seventh-day Adventist community, where residents often live more than 100 years.

“The incidence of diseases like diabetes, heart disease, obesity and cancer in these communities is extremely low,” she says. Author Buettner “found that these communities all shared certain characteristics, including a diet with moderate-calorie intake … of plant-based foods – lots of vegetables, fruit, whole grains, nuts and seeds – and plenty of legumes like beans, peas and lentils, and smaller amounts of meat.”

The populations coupled moderate alcohol consumption with regular physical activity, little smoking, stress reduction, social engagement and commitment to family.

“I believe in moderation. I’m a ‘foodie.’ I love food,” says the “Foodie Physician” with a qualification in culinary medicine. “I think that eating is one of life’s greatest pleasures and I don’t think you should have to deprive yourself. I believe in following a well-balanced, nutritious diet, enjoying the occasional splurge, and leading an active and fulfilling lifestyle.

“I also think that you shouldn’t have to sacrifice flavor when eating healthy food,” Ruder says. “Healthy food can and should be delicious.”

Bodden agrees: “It’s all about moderation.” She calls her talk “actionable,” enabling people to make immediate changes, looking in their kitchen cabinets, reading labels. “People don’t need more doctors” dumping raw data,” she says. “Don’t go ‘cold turkey,’ but keep in mind obesity and hypertension and diabetes. We all have busy lives, but what can we change to make healthy choices? Don’t go to too much of an extreme and cook a four-course meal from the organic farm, but look at ingredients on packages.”

Conference organizers say the entire “Food for Thought” theme is rooted in last year’s gathering, inspired by Dr. Fitzroy Henry’s “Nutrition: The preface to a healthy life.”

Each year, a spokeswoman says, nearly 1,000 attendees receive a post-event survey asking what was of greatest interest and might draw the most attention in the future.

A conference committee. chaired by Health Services Authority chief and CEO of the Cayman Islands Hospital Lizzette Yearwood, supplements its own research, seeking speaker nominations from the medical community and conference sponsors, the spokeswoman said.

“Nutrition was something that stood out in the feedback and is such an important foundation to healthy living that the committee thought it an important focus for more than just a single presentation.”

The theme,” she says, “grew from there to include the range of topics such as food and heart health, diseases triggered by food, fact vs. myth (diets and supplements), food and mental health, food education and nutrition during cancer treatment, on this year’s agenda. 

Inflationary dynamics: Clear as mud

Brendalee Scott-Novak, Butterfield

 Addressing the National Association for Business Economics (NABE), Federal Reserve Chairman Janet Yellen delivered a striking tone on the inflationary debate. Reiterating the “mystery” surrounding the recent low inflation readings, the chairman’s candid remarks did very little to stir markets.

Openly admitting the failure of monetary policy to spur inflation is one thing, but citing the committee’s possible misreadings behind the shortfall is profound for such a renowned institution sporting the brightest minds. How could these overtures not send markets into a tailspin? Could it be the case that investors need time to digest the news, or have markets long resorted to looking beyond the rhetoric to muddle through the inflation maze?

The answer lies somewhere in the fact that the inflation debate is a challenging and uncertain game. One needs to look no further than Japan’s struggle over the last two decades, or more recently, the actions of the European Central Bank and Bank of England having very little success in spurring inflation. Why then is the inflation target so elusive for policymakers?

Following the credit crisis, global central banks undertook some very unconventional policies to keep their respective economies afloat. Chief among the Federal Open Market Committee’s (FOMC) actions was the introduction of a zero interest policy. Since changes in economic activity and inflation occur with some lag subsequent to interest rate moves, central banks can only implement policies based on their potential versus actual impacts on the economy. In 2009, as the U.S. economy demonstrated signs of a recovery, the committee sought to reverse its accommodative stance with an eye towards fighting expected inflation.

Over the last nine years, Personal Consumption Expenditures (PCE), the Fed’s preferred gauge for inflation, has consistently failed to breach its 2 percent medium-range target set in 2012. Core inflation, which strips out food and energy prices, has also been running well below that level.

While the unemployment rate is firmly anchored at 4.4 percent, well below pre-crisis levels, further improvement in the labor market is expected to put upward pressure on wages. Other idiosyncratic forces that have restrained inflation recently are also expected to fall away. While the combination of these factors has historically been strong enough to push inflation higher, the chairman has cited a few factors that could derail the inflation goal and keep rates lower for longer.

Long-run inflation expectations

It is no surprise that markets and policymakers alike have both missed the mark in forecasting actual inflation. In the latest FOMC forecasts, there is still a 30 percent probability that the inflation rate will be either greater than 3 percent or below 1 percent due to oil prices, changing value of the dollar and other esoteric factors. Crucial to the effectiveness of the Fed as a policymaking body is its ability to shape expectations based on its influence in the past and guidance on the future. If long-run inflation expectations continue to diverge from the actual inflation rate, it could undermine the committee’s credibility and lead to instability in the real economy. Consequently, missing the inflation rate then becomes a real possibility.

Strength of the labor market

The rate of unemployment consistent with the economy operating at maximum capacity, commonly called the natural rate of unemployment, cannot be estimated with statistical precision. Due to structural and demographic changes in the real economy, this actual sustainable rate can shift over time and read much lower than historic projections.

It is, therefore, quite plausible that one of the reasons for the current shortfall is that the natural rate of unemployment is below the Fed’s median forecast of 4.5 percent. The implication that there may be much more slack in labor markets than previously anticipated partially explains the lack of wage growth and inflationary pressure. A further corollary would be that the economy could accommodate even higher levels of employment, necessitating a change in monetary policy to compensate for the lower inflationary expectation.

Dynamics driving inflation

Perhaps the most significant factor raised by the chairman is the possibility that the committee misspecified fundamental drivers of inflation. Given the changing global dynamics, there is increasing probability that other inflationary forces that have not been present historically are missing from the committee’s econometric models. An example is the falling cost of healthcare, a historically large component of household spending. Others have pointed to the integration of global labor supply and ease of accessing those markets, which reduces wage pressure on the local economy. Still there are other arguments touting technological disruptors, such as online behemoth Amazon providing cost-effective alternatives, thus keeping prices subdued.

Regardless of the reasons for the shortfall in inflation, missing the target rate over an extended period cannot be ignored. A persistently low inflation rate generally equates to a lower benchmark rate in normal times. While this may be cause for celebration for debtors, the general health of the economy would be at risk. Having benchmark rates close to zero limits the ability of policymakers to act in the event of adverse shocks to the economy and undermines the Fed’s credibility. The good news is, however, that the committee believes the recent inflation readings are merely temporary. If they are not, the committee stands ready to adjust their views and chart whatever course necessary to maintain their dual policy mandate. 

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