Contributed By: Jaime Naynudel - Contributing Financial Crime Consultant (Latin America)
Chronicles Of: Monte Friesner - Financial Crime Analyst & Consulaire
CAYMAN ISLANDS CONTINUES TO AVOID THE ISSUES WITH UK ON BENEFICIAL OWNERSHIP
The Government of the Cayman Islands continues to decline to participate with the United Kingdom, in its uniform plan to insure that UK Overseas Territories have transparency, regarding beneficial ownership of corporations. Whether the alternative policies and procedures advanced by senior Cayman officials are a deliberate attempt to insure that beneficial ownership of its companies remains opaque is not known, but they will neither be effective, nor advisable, given the growing world awareness of the abuse of offshore companies, by tax cheats, and criminal elements.
The UK Exchange of Notes, which is designed to be adopted by all Overseas Territories, requires:
(1) A Central Registry of information, accessible to UK regulators and law enforcement agencies, via a central point of contact.
(2) A real-time source of information, and not one that must require multiple inquires, or other requirements that will allow dilatory tactics, when inquiries are made.
(3) A prohibition on notification of the companies, or individuals, that are the object of the inquiry.
The Cayman Islands plan:
(A) Requires only the corporate service providers to retain the Beneficial Ownership in their records.
(B) UK inquiries would be routed through a Cayman Government agency, who would then obtain the information, and pass it along to the UK.
(C) It envisions using CIMA as the intermediary.
The Cayman plan is fatally flawed; it will not prevent the island's service providers from entering bogus information, deleting data when it is requested, or delaying ad infinitum any request for information. Cayman service providers are generally not licensed professionals. Therefore, there is no effective method of discipling them, should they delays for months, or notify the target of an investigation.
The use of CIMA is also not wise, as the agency has a long history of conducting investigations that take years, and are rarely completed, as well as allegations of corruption, including the alleged receipt of bribes, to delay, or even kill, investigations, by its staff, many of whom now hold assets that grossly exceed their income levels.
The entire Cayman transparency issue is further complicated by the fact that Cayman Islands corporate service providers often use BVI companies, to add an additional layer of opacity. This tactic must also be properly handled, in order to insure total transparency, to avoid clever subterfuge. using BVI companies as a screen.
If the Cayman Islands truly wants to reform, it need to adopt the UK plan; to do otherwise will most likely result in its placement on a future Blacklist, and a corresponding reduction in its attraction as an offshore financial center, not to mention additional foreign law enforcement and regulatory attention.