The Cayman Islands Bankers Association recently hosted guest speaker, former Cayman Islands Monetary Authority Chairman Timothy Ridley, at a packed gathering of industry professionals. Ridley delivered a hard hitting speech as to the actions he believes the jurisdiction needs to take right now if it is to continue its economic success thus far enjoyed. Business Editor Lindsey Turnbull reports.
The impact of Cayman’s inclusion on a grey list of countries by the OECD has serious implications for the continued success of the jurisdiction within the global financial services industry. Cayman was insufficiently proactive to avoid being placed on the OECD’s grey list, according to Tim Ridley, a list which is for all practical purposes now a blacklist, he said. Emphasising the point that the jurisdiction needs to learn from past experiences with the OECD, FATF, etc, Ridley said: “All too often Cayman has been late out of the starting gate, only to discover that the damage has been done by our inaction.”
He continued: “As we learnt with the FATF and the FSF in the 1990s, getting off a list is much harder than not being on the list to start with. And we applied that lesson and successfully avoided being on the first OECD tax havens list in 2000.
Cayman has recently geared into action by signing a slew of tax information exchange agreements with a number of countries and by enacting local legislation to allow disclosure of tax information even without a treaty or agreement. However Ridley is sceptical that this will be a “silver bullet” for Cayman. “While welcoming Cayman’s progress in signing TIEAs and introducing unilateral measures, they [the OECD] also suggest that higher marks will be given for TIEAs with some countries than with others (i.e. Greenland and The Faroes do not really count) and that the unilateral measures may not get the necessary recognition
Underscoring the importance for the Cayman Islands to take decided and swift action, Ridley said that there was anecdotal evidence to suggest that international institutions were increasingly concerned about the heightened reputational issues raised by conducting business through or with offshore jurisdictions and certainly with those not on the white list. Indeed, some of Cayman’s key competitor jurisdictions that have been white listed are using this to ramp up their marketing on this basis.
Plan of action
Ridley outlined a list of actions that he felt were crucial to Cayman’s continued success. Starting with government, he said that the industry needed committed political leadership and support for the financial services industry “and all it takes for it to flourish”. He said that a dedicated Cabinet Minister was required, backed by a well-resourced government department so that the right platform “is nurtured and enhanced constantly and promoted both locally and internationally.
He continued, “Both the public and private sectors need to constantly demonstrate to the community as a whole how critical the financial services industry is to the economic well being of the Islands.”
Bankers in Cayman back up Ridley’s suggestions. Butterfield Managing Director Conor O’Dea commended Ridley on his speech and agreed that there was much to be done. “I agree that a revamp of government’s structure with regard to the financial services industry is necessary. We now have some data to reflect the impact of financial services on the Cayman economy, and the private sector should have input into the structure so that they support it on a go forward basis.”
Eduardo D’Angelo P. Silva, vice-chairman, The Cayman Islands Financial Services Association furthers this view: “I wholeheartedly support Mr. Ridley’s views that the financial industry deserves the strongest support and the undivided attention from an elected government member. The recent Oxford Economic Impact Study confirmed what many knew, that the financial industry is responsible for more than half of the country’s GDP, offering the best paid jobs and the most rewarding careers. That level of contribution to the well being of our population deserves a minister and a portfolio of seasoned professionals attending to its needs on a permanent basis.”
Brett Hill, president of Fidelity Bank (Cayman) Ltd. also concurs with Ridley’s view and says: “We need to have a minister responsible for financial services, as distinct from the Financial Secretary. We have a Minister of Tourism, so why not a Minister of Financial Services to work hand in hand with the industry.”
Ridley also called for the government and the private sector to work in tandem with each other, reforging the old public/private sector partnership lost of late.
“Government and the private sector must interact much more closely, respect and listen to each other and be proactive in moving forward together,” he said. “This breakdown in relations can be rebuilt with a new Ministry dedicated to the financial services industry.”
O’Dea said that the private sector has had to ensure it structures itself also to be effective, saying that “it has become too splintered. The private sector is now actively focused on this.”
CIBA President David Walker urged: “Roll up your sleeves and put some sweat equity into this issue. If we fail we have no-one to blame but ourselves. We need to rally organisations with clearly stated objectives. The CIBA has demonstrated its eagerness in this regard.”
Devil in the details
Ridley then outlined specific ways in which the jurisdiction could stay on top. These included keeping legislative regimes current, innovative, competitive and not unnecessarily burdensome, enhancing the financial services infrastructure (for example The General Registry) and having earlier and better engagement with key major jurisdictions and stand setters. CIMA, he said, could play a major role in this regard and needs to participate in and engage in dialogue with global colleges of regulators to ensure fair international standards are developed creating non-discriminatory playing fields open to all legitimate offshore financial centres.
Ridley called for agreements to be developed or improved with key counterparty jurisdictions for cross border cooperation and assistance with appropriate benefits, gateways and safeguards for legitimate privacy and other legal rights. He also wanted the improvement of advance intelligence to ensure early and proactive engagement on, rather than late and reactive responses to, onshore and international developments and initiatives.
The need for far better targeted and effective lobbying and media relations was also top on Ridley’s to do list, particularly in key centres such as Washington, London, Brussels and Paris to influence political and media perceptions, opinions and outcomes
He also looked to Cayman to sponsor and support think tanks and the research, publication and dissemination of quality academic analyses of the beneficial impact of OFC’s on the world economy.
He also called for enhanced thinking on immigration policies, saying: “We must provide the appropriate physical infrastructure, sensible and welcoming immigration policies to attract and keep the brightest and the best and well educated, motivated and participating local professionals and staff to work in partnership with them.”
Green shoots of progress
Heartened by some movement in the right direction, Ridley said that there was evidence that much needed local legislation was now hitting the statute books, a commercial court was being established and the government had found “a new found vigour in pursuing international engagement, cross border assistance arrangements and media relations”. He was also pleased to see the CIFSA lobbying task force and other private sector initiatives and the opening of overseas offices in new markets by local law firms.
Eduardo furthers: “The country needs a strong, authoritative voice for the private sector, both locally and overseas, and CIFSA is uniquely well positioned to be that voice. Now, more than never, we need all firms in the different industries that comprise our financial sector to become members of CIFSA and to contribute brains, sweat and funds to this cause, as it was called by CIBA’s President David Walker.”