Cayman at a crossroads

Last month’s International Funds Conference entitled ‘Looking Forward: Risks, Opportunities and Solutions’ kicked off a slew of conferences to be held this year in Cayman based on this ultra hot topic. Carlyle McLaughlin, Chairman of the Cayman Islands Monetary Authority delivered the opening address, and looked ahead at the road Cayman needed to focus on if it is to continue down the path of success when it comes to delivering world class financial services. Business Editor Lindsey Turnbull reports.

Cayman needs to view itself firmly in the context of an international financial force, and be prepared for the changes brought about in the global economy that will inevitably impact this jurisdiction, according to CIMA Chairman McLaughlin.

At the International Funds Conference, sponsored by attorneys Stuarts Walker Hersant, PriceWaterhouseCoopers and Cayman National Bank, McLaughlin said, “We can see ourselves, here in the Cayman Islands, at a crossroad in respect to so many things which will be different as the global economy around us addresses changes which everyone admits must occur. The major countries of the world, I believe for the first time since World War II and the Great Depression of the early 1930s, are facing the fact that there is a commercial interdependence to the global economy that needs to be addressed. Their activities cannot be looked at in isolation anymore, as no single economy is able to stand on its own and not at least consider the impact of the rest of the world on its actions.”

McLaughlin spoke emphatically about Cayman’s ability to continue on a forward path, successfully negotiating any international pressures from abroad, saying, “We can move forward with a calm demeanour…with a sense of purpose and confidence that we have a role to play in that new world order and, despite political rhetoric to the contrary, we can still find a niche to be productive because we bring something to the table.”

He was scathing about what he termed the “Hollywood-based slant” on Cayman that painted the jurisdiction as “supposedly provide an unhealthy private society that is being used daily by the worst white-collar, drug-lord and terrorist criminals in the world.”

McLaughlin said this was “an affront to everyone in this room. Cayman can provide a useful purpose to the world despite the perception from media and politicians that we only have a negative role.”

He dismissed the continual drive by international press to provide a distorted view of operations here saying that these attitudes were “clearly designed to sell more books and newspapers and deflect attention from the real issues that need to be addressed and to provide a scapegoat for failures within their countries, despite having greater resources and expertise. It is not based on any reality.”

He continued with hard-hitting prose, “What they should understand is that their ‘solutions’ only deal with the symptoms and not the disease. The disease is the continued lack of acceptance of responsibility for something as basic as the fact that the consumer, politician and government have to pay for mortgages, credit-card debt and welfare/other state programmes, and the bailouts of businesses with greedy or flawed business models. This is the disease and it needs to be first addressed at home.”

McLaughlin detailed the real underlying reasons why offshore financial centres were so necessary to the mechanics of a properly functioning global economy and referred to such services as providing tax efficiency as well as providing clients with important benefits such as political stability, the rule of law and contracts, expertise in the fields of activity of a sufficient size to make economic sense in the circumstances, and a regulatory regime which would enhance business prospects.”

In the next few months, McLaughlin said Cayman would be again in the spotlight from overseas entities as it undergoes a “dizzying period of review, with the planned IMF and UK OTC visits in addition to our applications for IOSCO membership and the expected publication of the OECD “green list”.”

He said that it was clear that Cayman has a high standard to meet, but he believed Cayman regime has faced and met these challenges before and will again be shown to be of the highest calibre, not just with what is in place legislatively but with what is actually in operation on the ground.

With regard to the infamous Madoff scandal, McLaughlin was cautious to say that the final impact to Cayman’s funds would only be seen over the course of a the next few weeks as the final impact on licensees could only really be addressed once all redemption calls had been processed. He said, “In the context of the current total population of our licensees, the quantities of funds which fall into these [affected] groups are still fairly small but of course individually could be quite large in dollar value.”

McLaughlin summed up his opening presentation by reaffirming CIMA’s desire to work in tandem with the private sector to ensure that lessons are learned through recent fund and institution collapses, saying, “CIMA has taken on board the areas generally identified thorough the Lehman, Alpha Yield, AIG and Madoff announcements as weaknesses in regulatory frameworks around the world. CIMA expects to conduct its own review during the upcoming months to proactively identify areas to strengthen our ability to provide effective and efficient regulation in this jurisdiction. We trust that the industry will continue to be involved in public consultations that would be expected with any changes to legislation, rules and guidance notes.”