What a difference a year makes. In the space of the past 12 months, the Cayman Islands and its plans for a searchable beneficial ownership platform, instead of a central register of beneficial ownership information, has gone from an impasse with the UK and the focal point of attacks by politicians across the G20 to being an accepted industry partner.
Global acceptance of Cayman's approach to collecting beneficial ownership information by licensed corporate service providers and providing access to the information to law enforcement officials, rather than the public central register and system of self-certification that former UK prime minister David Cameron had initially proposed, has come as Cayman agreed to join an initiative by the UK to develop an enhanced programme of information sharing. This programme will effectively lead to the sharing of information on the beneficial ownership of companies and trusts with the UK and other jurisdictions that take up Cayman's offer to participate in the new programme.
The Exchange of Notes agreement, signed by a delegation from the Cayman Islands on the cusp of a key Anti-Corruption Summit in the UK in April, builds on Cayman's record in participating in the global fight against financial crime. The crucial point for the Cayman financial services industry is that this will be without the use of a central register of beneficial ownership information, as the UK had originally intended, nor will any information be accessible by the public.
The key to this agreement was a visit to the Cayman Islands by senior representatives from the UK's National Crime Agency (NCA) and the Foreign and Commonwealth Office (FCO), two months earlier, when the proposed improvements to the current system of reporting beneficial ownership information were examined. Having met with Cayman Islands Premier, Hon. Alden McLaughlin and Minister of Financial Services, Wayne Panton, the UK delegation were convinced that Cayman's proposed system would be "a similarly effective, viable alternative to the UK's approach of a central register," Minister Panton said in a statement after the 23 February meeting. The Cayman Islands proposals, which are still being finalised include a non-public, centralised platform, which would be accessed locally, which Cayman officials said would be an additional enhancement to the nation's current, strong anti-money-laundering regime. Cayman law has already required for some time that corporate service providers verify the beneficial owners of entities incorporated in the Cayman Islands. The proposed enhancements to the framework in Cayman have been developed not only to align with global regulatory standards and to support other jurisdictions in the fight against serious crime, while also being appropriate for Cayman's business model which consists of primarily institutional clients. The Exchange of Notes between the Cayman Islands and the UK outline the parameters for the enhanced collaboration on this issue. It will ensure that competent authorities in both countries should be able to quickly identify all companies that a particular beneficial owner has a major stake in, and that companies or their beneficial owners must not be alerted to the fact that a law enforcement or tax authority investigation is under way.
The main benefit of the new platform compared to the current system in the Cayman Islands is that UK authorities will have the right to request information from a competent authority in the Cayman Islands who will have direct access to the information. This will allow for greater efficiency and faster reporting of key information that may be required in order to detect money laundering, corruption and bribery. It is notable that the proposed beneficial information platform will only be accessible by a competent authority in the Cayman Islands, as is currently the case.
"Government continues to maintain a position of zero tolerance on illicit activity and financial crime," Premier McLaughlin said. "Our commitment to the UK, and to other foreign authorities, is to collaborate and cooperate to ensure that those responsible for illicit activity can be prosecuted in the relevant jurisdictions."
Final proposals for the G5/G20 initiative on beneficial ownership are expected from the OECD in October 2016 with some 48 countries already committed towards the programme, including the UK's Overseas Territories and Crown Dependencies. The portal, when it is in place, which will allow law enforcement – and not the public – to search for beneficial information, is understood to be capable of providing a response within 24 hours, or even one hour where there is a matter of urgency.
About the Author
David is a financial writer and editor with over 20 years' experience, specialising in offshore finance and regulatory topics. Reporting in London he worked for Dow Jones Newswires, appeared in the Wall Street Journal Europe and covered structured finance for the International Financing Review. He is a former editor of the Cayman Financial Review magazine and acts as a media consultant to a number of firms in the offshore financial services sector.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
