The jurisdiction of choice for financial services

17 Feb The jurisdiction of choice for financial services

Tara Rivers, Minister of Financial Services and Home Affairs, Cayman Islands, presents the testaments of the success of Cayman Islands as a preeminent financial center

How is the Cayman Islands coping with the COVID-19 pandemic? How is the financial services industry addressing the latest changes in the marketplace as well as global economies?

The Cayman Islands, as a whole, has coped quite well with the challenges posed by the COVID-19 pandemic. Currently, we are in the process of implementing a national voluntary COVID-19 vaccination plan, with the goal of achieving herd immunity amongst the most vulnerable in the community, as well as to safely re-open our borders for international travellers. Throughout the pandemic, the government has taken bold and decisive steps to protect the health and safety of the citizens and residents, also considering the impacts on the local economy. We took some very specific actions to protect the wellbeing of our entire financial services industry. Some examples of the actions taken included using technology to facilitate the ongoing diplomatic engagement with international and regional regulatory bodies, as well as facilitating local business. On another note, the government took policy decisions and legislative action to support business continuity, such as deferring fee payments, extending statutory filing deadlines and encouraging the use of technological advances to complete financial services track transactions. In response, the local financial services industry was able to remain quite stable throughout, using the combination of business continuity plans and online systems, in order to maintain and, even in some cases, attract new clients during this period.

What are the areas where the Cayman Islands is competitive and attractive to foreign investors, with reference to the financial services industry, and why?

The Cayman Islands is a leading centre for financial services, having a robust and internationally recognized regulatory regime and frameworks. Particularly, Cayman is attractive for investment funds, with more than 11.000 mutual funds and more than 12.000 private funds registered here. In addition, there are more than 100.000 companies registered in the jurisdiction. We are also a major player in the insurance sector, ranking as the second largest captive insurance domiciled in the world, with over 659 captives based here, with the Cayman Islands being the leading jurisdiction for healthcare captives. Other areas of strength include banking, with branches of 40 out of the 55 largest world banks established here, trusts, structured finance, corporate services, ship and aircraft registration, all forming strong aspects of our financial services industry. The Cayman Islands’ government makes great strides to continuously innovate and diversify the areas of strength within our financial services industry. This can be seen most recently in the creation and implementation of a legislative regime to regulate persons and entities that provide virtual asset services. The government is currently considering and looking to launch a new restructuring regime, that will allow companies to petition and pursue restructuring without having to commence winding up proceedings for the company. As a result, companies will retain the benefit of having a statutory moratorium on claims during restructuring and they will retain the ability to petition for provisional liquidators. Again, this is anticipated to have a positive impact for users of Cayman corporate vehicles, given the potential increase in the global restructuring work that may happen, due to the pandemic and the resulting impact on global economic conditions. These are some of the areas where the Cayman Islands continues to innovate and look forward to possible business opportunities that benefit the global financial services economy and industry as a whole. In addition, the government, through the work of the Ministry of Financial Services, is considering enhancements to our trusts and insurance regime and products. We are looking at increasing the kind of sustainable finance and green financing, in order to attract more of the environmental, social and corporate governance investors.

Some Caribbean destinations are more famous than others. On the other hand, each country has its own appeal and strategy to attract talent, capital, expertise, tourism, businesses and so on. What do you see as your strategy, as the Cayman Islands, and what are your unique selling points?

 The Cayman Islands is really attractive, as we attract all types of legitimate financial services business, thanks to our sophisticated business-friendly environment, which is underpinned by sound legal and regulatory frameworks. Cayman Islands provides a competent government, economic and political stability, relatively high standard of living and a low crime rate. We have an experienced jurisdiction as well as the utmost respect for the rule of law. We have great infrastructure and high-calibre financial services professionals and service providers. Thanks to all those factors working together, the Cayman Islands is seeking increased interest from international businesses and individuals seeking to reside and do business here. Examples in recent inflows include reinsurance, private equity, houses and family offices, to name a few. Cayman Islands is attractive to businesses and individuals that need a secure and stable jurisdiction, in which they can domicile entities and establish other business connections. Our stability, our innovation as well as the depth of the experience that we have, underline that the Cayman Islands continues to be a net beneficiary of this influence in that regard. Notably and remarkably, the Cayman Islands has achieved growth, while responding robustly to the various international assessments and developments. As a jurisdiction, we are committed to adapting and adopting, as necessary, the evolving global regulatory standards for financial services. The government has put in place a number of measures designed to enhance our legal and regulatory frameworks to codify a risk-based approach. Regulation may not always be welcomed, but our financial services industry and their clients ultimately benefit from Cayman Islands’ ability to participate on a level playing field with international financial centres and also to meet or exceed the international standards that we have here in the Cayman Islands.

Last year, the Cayman Islands was removed from the EU list of non-cooperative jurisdictions for tax purposes and Moody’s has maintained Cayman Islands’ triple A rating. These came back on the back of the vote of confidence already established by the OECD. What critical elements have changed and evolved to reach this level? What has been the impact on your country and its vibrant financial service sector due to these ratings?

Being removed from the EU’s non-cooperative list of jurisdictions for tax purposes in October of last year, was a result of the constructive discussions between the Ministry of Financial Services and various EU officials. These discussions led to the legislative changes that further enhanced our regulatory regime for investment funds. Most importantly, they also provided an even greater amount of measures of accountability for protection of investors. These measures align with industry best practice, that are familiar to industry practitioners and worldwide. The Cayman Islands’ appearance on the list was as brief as it could have been. It is also important to note that since 2017, when the list was first published and subsequently updated a number of times thereafter, there were over 30 countries that have, at some point, been added and removed from the list. In a demonstration of confidence in Cayman Islands and stability, as well as our commitment to meeting regulatory standards, clients continue to do business with the Cayman Islands, during those months in which we were listed, despite the pandemic. This is a testament to the strength and resilience of the Cayman Islands and its stewardship.

The government is certainly pleased with the EU’s decision to remove the Cayman Islands from that list of non-cooperative jurisdictions for tax purposes. This recognition by the EU is in line with the OECD’s earlier recognition of Cayman’s tax regime. In addition, the most recent recognition of Cayman Islands is commitment to adhere to and implement international standards for tax transparency, comes from the OECD’s Global Forum Peer Review of our domestic and international legal frameworks for the automatic exchange of financial account information, commonly known as the AEOI. Cayman’s framework was found to be called in place with no recommendations needed to revise out framework at this time. This latest endorsement by the OECD came on the tax information exchange framework that was published in December of last year.

You have been at the forefront of the Cayman Islands perception battle, particularly when it comes to Hollywood and the big screen. Could you tell us a bit about your journey and the nation’s struggle in challenging stereotypes and the success of your efforts so far?

Since the very beginning of my tenure as the Minister of Financial Services in June of 2017, I have repeatedly communicated the need for all stakeholders, including the government and the industry alike, to engage more proactively in addressing the perception problem that, unfortunately, still exists among some influential quarters. One of the key aspects of our public relations efforts has been to challenge the stereotypes that may abound regarding the Cayman Islands. These stereotypes exist due to great misinformation or ignorance about Cayman Islands and our financial services industry. As such, there are throwaway references that can be seen in television, films and advertisements, without any real thought as to their validity. Therefore, it is up to us, as a jurisdiction, to challenge those stereotypes as appropriate and also help educate the entertainment industry and media worldwide as to what the Cayman Islands is really all about. One such challenge emerged earlier this year, when the government issued a cease and desist letter to AT&T, requesting that it changed one of its TV advertisements that depicted the Cayman Islands in a negative light. We also took the opportunity to inform the company that the Cayman Islands’ financial services are provided in accordance with global financial standards and that the OECD rankings placed the Cayman Islands on part with other countries, such as Canada and the United Kingdom, to name a few, for transparency and track tax information sharing. We stated that any insinuation to the contrary was wrong and inaccurate. We also advised them that the government reserved our right to take legal and appropriate regulatory actions, should they not comply with our request. I am happy to report that AT&T did, in fact, agree to change and remove the reference to the Cayman Islands from their popular advertisement, as a result.

There have been other challenges made by the government during the past year, including, for instance, challenging publishing companies referencing to Cayman Islands as being tax haven in one of their textbooks. As a result of our challenge and dialogue with the company, the publishing company subsequently agreed to remove that reference in all future editions of the publication. Ultimately, the success of these efforts to help change the negative narrative about the Cayman Islands will largely depend on taking advantage of opportunities to engage positively and constructively with the media and ensure that the facts about the Cayman Islands and our legislative and regulatory frameworks governing financial services are known and understood. That will hopefully help script writers, producers and editors to feel less inclined to include the throwaway comments about the Cayman Islands in the future.

Focusing on your agenda, could you give us an overview of your main goals and targets for 2021 and beyond? What is your vision? How do you expect to implement these policies in the short, medium and long-term?

Some of my main goals and targets are to continue to provide the kind of policy direction and guidance, in order to strengthen relations, the engagement efforts and the strategy with the international policy makers and media. I would also like to help in ensuring that the Cayman Islands continues to be at the forefront of innovation and compliance with the evolving global regulatory standards governing financial services. Our financial services expertise and product offerings are diverse. We want to ensure that we remain a strong choice for clients across the spectrum of legitimate financial services and cross border business. In essence, these are the overarching goals, strategies and targets for the short, medium and long-term of the country. Regardless of the result of the polls in a few months, we do feel that we have worked very hard. We have the numbers to show that even in some of the most challenging times that this country has ever faced. With respect to the number of international assessments happening at one time, the need to make the various legislative and regulatory changes and on the backdrop of a global pandemic, not only we maintained, but we have also grown in the areas of our financial services industry. We managed to grow with a rate of 2 percent over the last year. This certainly speaks for itself and there are very few regions or countries that are able to boast these kinds of figures after this kind of global shutdown that we have been through.

What would be your final message for our readers of Newsweek?

The continued growth of the financial services industry year over year in real economic terms is a testament to the continued success of the Cayman Islands as a global financial centre. This success, which has been consistent throughout this period of intense change over the last several years, is again a critical piece of evidence regarding the leadership of this government and those at the helm of the financial services, helping the country navigate in some extremely turbulent waters.

The year 2020 has been a year like none other for Cayman Islands. We have experienced intense earthquakes to raging landfill fires, from a worldwide pandemic to powerful regional tropical storms and hurricanes, and yet, the Cayman Islands has successfully managed to weather them all. Cayman Islands’ reputation as a major player in the global finance arena has been cemented over many years and is set to continue well into the future for the financial services industry, which remains the strongest and most robust pillar of our economy.