Setting the financial industry record straight

The 8th Financial Due Diligence Offshore Alert Conference was recently held at The-Ritz Carlton, South Beach, in Miami Beach, Florida. More than 250 attendees from over 30 jurisdictions met to discuss current issues facing the international financial industry, with a strong focus on the role of the offshore financial centres. Indicative of the attention being focused on OFCs these days, several reporters from around the world were also in attendance. The Journal reports.
As it has happened in the past, the Cayman Islands had the second largest contingent of attendees (after those from the United States) with around 40 people, including 10 speakers and panelists. The conference organiser and editor of the newsletter Offshore Alert, journalist David Marchant, opened the works by reminding those in attendance that the conference is neither pro nor against the offshore centres and that its objective is to provide a free, fair and balanced platform for exchange of ideas. 
And that platform was set for the opening panel. With the theme “Offshore Financial Centers – The State and the Future of the Industry”, it brought together speakers such as Eduardo D’Angelo P. Silva, past chairman of Cayman Finance; Jim Miller, chair of the Commission that published the Miller/Shaw Report about the finances of the Cayman Islands Government; Myles Flint, counsel, Corporate & Commercial with Appleby in Bermuda; Cherise Cox-Nottage, head of Legal Department, UBS (Bahamas); Jack Blum,  from the Tax Justice Network, a strong adversary of OFC’s and moderator Burke File of Financial Examinations & Evaluations from Arizona.  
Clearly on the forefront of the agenda for many offshore financial centres is the present crisis and the economic difficulties that their governments are facing. Asked specifically about the situation in the Cayman Islands, Eduardo was very clear in saying that those difficulties were only the consequence of a short term mismanagement of the country’s public sector finances. He added that, “although the government of the Cayman Islands is facing a shortfall of funds, our situation is much less difficult than that of the US, UK and many other onshore jurisdictions. The difference is that Cayman does not have a printing machine to create dollars, pounds or euros,” and therefore cannot afford to roll the deficit for future generations to pay. “And that’s a good thing!” he added.
Miller, one of the authors of the Miller/Shaw Report Commissioned by the Cayman Islands government expanded on this matter, by stating that the only feasible long term solution for countries like Cayman and other OFCs is fiscal prudency, maintenance of their present fiscal model (without the imposition of direct taxation) and adherence to international standard that will keep a safe environment for the financial industry.
Blum brought back some of the old and worn out criticisms made about OFCs along the years: that they assist in criminal activities, money laundering, and deviation of government’s funds that could be used to fix problems such as poverty and underdevelopment in many poor countries of the world.  However, he was promptly rebutted by the panelists who categorically stated that all of the OFCs represented in that discussion had been reviewed and approved several times by a varied of international bodies such as the International Monetary Fund, the Financial Action Task Force and the IRS, just to name a few. There is strong evidence that OFCs have implemented the requirements of strong compliance regimens, anti-money laundering laws and regulations to a much larger extent than onshore countries that criticise OFCs.
Interviewed by the Royal Gazette of Bermuda after the panel, Eduardo reinforced the message that OFCs that are well regulated and agile, such as Bermuda and Cayman, stand the best chance of competing with their onshore rivals and to continue to thrive in the financial services arena.   
On a panel titled “Serious Financial Crime: Current Trends in the Bermuda-Caribbean Region & Steps Being Taken to Combat It”, Owen Henry of Cayman National Corporation and Martin Livingston of Maples and Calder represented the Cayman Islands in discussing with representatives of other offshore centres  which jurisdictions are taking seriously their commitment to clamping down on financial crime, the enforcement of  new anti-financial crime laws and new ways that financial criminals can use to exploit jurisdictions and what is being done to detect the activity and punish those responsible. The audience was overall very impressed with the level of the discussions, which once again showed how seriously the Caribbean OFCs take the detection and prevention of serious crime.
This year, for the first time, a speaker from Brazil participated on a panel discussion with the theme “The State vs. The Victim: What Happens When Proceeds of Crime Forfeiture Laws Collide with Victims’ Rights”. Eronides Aparecido Rodrigues dos Santos, a criminal prosecutor from São Paulo, Brazil, was invited to share his experiences in a recent case where the rights of bona-fide depositors and creditors of a fallen financial conglomerate were threatened by the government’s intention of forfeiting all assets of the group as a penalty for the mismanagement of its affairs. As there was no precedent in Brazilian law for such situation, an agreement was reached amongst the several government agencies and the courts whereby those rights were reimbursed first, out of the liquidation proceedings, and any remaining assets would then be forfeited to government.
A panel moderated by Nancy Sour of ATC in the Cayman Islands discussed “Data Protection vs. Access to Information” and the consequences of recent legal and regulatory decisions in many places, the most notorious being the European Union, whereby personal information becomes highly regulated and subject to several lawyers of protection. How multinational conglomerates can navigate the differences in regulatory regimens and make sure that they don’t run into trouble with their customers or the regulators was perceived as a matter of grave concern.
One interesting case discussed was the well publicised problem faced by SWIFT, an international provider of clearing services for the vast majority of banks around the world, which used to have their main computer servers in the US and Europe interconnected (as a commonly employed redundancy feature that improves the resilience and responsiveness of its systems).  However, since the implementation of the Patriot Act, the US authorities demanded access to private information of certain financial transactions that could be of their interest. That collided with the European privacy rights, and SWIFT could not obey one side without getting into trouble with the other.
The result was the company, certainly at a non-negligible cost, had to sever the connection between their computer systems, and dedicate the US computers to provide services only to its US customers, concentrating the European business on the other side of the pound. That obviously imposed serious technical challenges on top of the additional costs, and was solely a result of the uncertainties still existing in the realm of data protection and the right to privacy.
The conference was brought to a close by a highly anticipated presentation by UK investigative reporter and film maker Andrew Jennings with the theme of “Corruption in Soccer:  the Secret World of FIFA”.
Mr. Jennings didn’t mince words in reporting what he described as a long history of corruption involving the most popular sport in the world and the men who are elected supposedly to promote and protect it. His strongest criticism was directed to Mr. Jack Warner, president of CONCACAF, and he exhibited videos of his several attempts at interviewing Mr. Warner regarding the allegations of corruption against him. Given the proximity at the time of the conference of the World Cup which is currently being played in South Africa, the presentation raised much interest and was a perfect way of concluding two days of high level discussions and great exchange of ideas.

Next year’s conference is already schedule for early April, at the same Ritz-Carlton, South Beach, in Miami Beach.


From left, Jim Miller, chair of the commission that published the Miller/Shaw Report; Myles Flint, attorney with Appleby in Bermuda; Cherise Cox-Nottage, from UBS in Bahamas; Jack Blum, from the Tax Justice Network; Eduardo D’Angelo P. Silva, past chairman of Cayman Finance