Cayman
has passed other laws dealing with provision
of information internationally in respect
of crime, but the authorities habitually
do not respond to requests for information
regarding fiscal matters or tax evasion.
In January 1999 the
Cayman Islands government bowed to pressure
from the UK and passed the Proceeds of
Criminal Conduct (Amendment) (Foreign
Offences) Law which introduces fiscal
crime as a reason for enforcing foreign
blocking and freezing orders - but only
if a crime has been committed in Cayman,
which has no concept of fiscal crime.
It remains to be seen what effect the
new law will have.
After the Cayman
Islands were included on the FATF's list
of 15 jurisdictions having inadequate
defences against money laundering in June
2000 (it was subsequently removed) the
government introduced four bills aimed
at tightening up supervisory procedures
and information exchange arrangements.
The
Monetary Authority has bilateral information
exchange agreements with
14 overseas regulatory authorities,
and a multilateral MoU with eight authorities
in the Caribbean.
In
May, 2006, the Cayman Islands Monetary
Authority (CIMA) and the Office of the
Superintendent of Financial Institutions
Canada (OSFI) signed a memorandum of understanding
that provides a framework for cross border
cooperation between the two countries.
The
MoU establishes a protocol for the sharing
of information and protection of information
shared, cooperation regarding on-site
inspections carried out by one regulator
on supervised financial institutions in
the other jurisdiction, and ongoing coordination.
OSFI
is responsible for regulating and supervising
all federally chartered, licensed or registered
banks and insurance, trust and loan companies,
as well as cooperative credit associations
and fraternal benefit societies in Canada.
CIMA
General Counsel, Mr Langston Sibblies,
noted that the agreement was important
since OSFI, as the federal regulator,
has jurisdiction in all of Canada's provinces.
"The
MoU will allow us to develop cooperative
relationships in a structured and clear
way and will further enhance supervision
of Canadian entities operating here, particularly
in the banking sector," he observed.
The
MoU is subject to the domestic laws of
both jurisdictions, as with other memoranda.
Mr
Sibblies continued: "One area of concern
for OSFI in negotiating the MoU was the
preservation of confidentiality of information
that would be provided under the agreement
and the assurance that information received
would be used for lawful supervisory purposes.
"On
examination of our respective legislation
we were both satisfied that our laws governing
information exchange and deterring financial
crime are equivalent. This facilitated
the establishment of the MoU."
CIMA's
Managing Director, Mrs. Cindy Scotland,
said this agreement underscored the importance
Cayman, as a major financial centre, placed
on international cooperation.
"The
MoU with OSFI again demonstrates our commitment
to assist overseas regulators in a manner
consistent with Cayman's laws as we pursue
our mission of creating a competitive
and internationally recognised financial
services industry," she stated.
On
February 21, 2008, a memorandum of understanding
for the exchange of information and investigative
assistance between CIMA and the FSA, the
UK's national regulator of financial services
and markets, was signed. The agreement
provides a formal basis for cooperation
between the two authorities.
The
MoU is similar to the other agreements
in place between CIMA and overseas financial
regulators. It outlines the types of assistance
that can be requested and given by CIMA
and the FSA.
This
includes: providing, confirming or verifying
information; obtaining specified information
and documents from other parties; discussing
issues of mutual interest; questioning
or taking testimony of persons designated
by the requesting authority; arranging
and/or conducting inspections of financial
services providers; and permitting representatives
of the requesting authority to participate
in enquiries by or on behalf of the requested
authority.
The
MoU also outlines the procedure each regulator
will use for making requests, and explains
how requests will be assessed to determine
if the required assistance can be given.
The
agreement has provisions for the treatment
of confidential information that each
authority may receive under the MoU. Such
non-public information can only be disclosed,
the MoU states, "in accordance with
disclosures permitted under its applicable
laws, regulations and requirements".
According
to CIMA's Managing Director, Cindy Scotland,
the agreement represents a significant
development for the Cayman financial services
industry.
She
announced following the signing of the
agreement that: "The FSA is an important
regulator of a major G7 country. We see
this MoU as reinforcing our strong international
cooperation regime and further demonstrating
our commitment in this area."
In
March 2009, the Cayman Islands and the
seven Nordic countries, comprising of
Denmark, Faroe Islands, Finland, Greenland,
Iceland, Norway and Sweden, concluded
technical negotiations on a series of
bilateral agreements, including tax information
agreements, at a meeting between the respective
delegations held in Copenhagen on March
5-6.
These
were second round negotiations, the first
round having taken place in the Cayman
Islands on April 17-18, 2008.
“We
are very pleased to see these agreements
come to fruition with our Nordic Group
partners. It is proof of what can be achieved
when parties approach negotiations in
a fair manner, and we are keen to continue
this trend, involving, on our part, effective
arrangements for the provision of information
on tax matters,” said Cayman Minister
for International Financial Services Policy,
Alden McLaughlin, adding: “This
is further evidence that the Cayman Islands
does not trade on secrecy or illicit tax
activity.”
The
seven tax information agreements were
due to be signed in Stockholm in April
2009, after all countries have completed
their individual administrative protocols.
The
collateral commercial agreements, also
signed in Copenhagen, were due to be signed
at the Norwegian Embassy in Paris in mid-June.
The
Cayman Islands Monetary Authority has
also entered into MoUs with regulatory
bodies in Brazil, Malta, Argentina, the
State of Washington, Jersey, Isle of Man,
Bermuda, Jamaica and Panama.
Update,
15 October 2009: The
Cayman Islands signed a TIEA with France
on 5 October 2009
The
Cayman/US Tax Information Exchange Agreement
The
agreement specifies that the Cayman Islands
will share tax information to help the
US government trace financial criminals.
Former IRS Commissioner Donald Alexander
told the US media that the treaty will
enable the IRS to overcome the secrecy
surrounding the accounts of financial
institutions in the Cayman Islands to
allow it to launch audits for tax evasion
and money-laundering.
"Right
now," said Mr Alexander, "nothing
is a fair description of the cooperation
the United States is getting. It's a hotbed
of tax evasion. This is a good step in
the right direction."
The
agreement covers information relating
to "the administration and enforcement
of the domestic laws of the parties concerning
the taxes and the tax matters covered
by this Agreement, including information
that may be relevant to the determination,
assessment, verification, enforcement
or collection of tax claims with respect
to persons subject to such taxes, or to
the investigation or prosecution of criminal
tax evasion in relation to such persons".
Information
has to be provided by the Cayman government
without regard to whether the person to
whom the information relates is, or whether
the information is held by, a resident
or national of a party; and provided that
the information is present within the
territory, or in the possession or control
of a person subject to the jurisdiction,
of the requested party.
The
taxes covered by the Agreement are federal
income taxes, "but the types of tax
covered may be extended by agreement between
the parties in the form of an exchange
of letters". That appears to mean
that the Cayman government can agree with
the US to extend coverage to other taxes.
The
agreement covers "criminal tax evasion",
which means: "wilfully, with dishonest
intent to defraud the public revenue,
evading or attempting to evade any tax
liability where an affirmative act constituting
an evasion or
attempted evasion has occurred. The tax
liability must be of a significant or
substantial amount, either as an absolute
amount or in relation to an annual tax
liability, and the conduct involved must
constitute a systematic effort or pattern
of activity designed or tending to conceal
pertinent facts from or provide inaccurate
facts to the tax authorities of either
party."
Information
must be provided even if the alleged criminal
behaviour was not criminal in the Cayman
Islands. The signatories agree to provide
themselves with the authority to obtain
information held by banks, other financial
institutions, and any person, including
nominees and trustees, acting in an agency
or fiduciary capacity; information regarding
the beneficial ownership of companies,
partnerships and other persons, including
in the case of collective investment funds,
information on shares, units and other
interests; and in the case of trusts,
information on settlors, trustees and
beneficiaries.
For the US to make a request under the
agreement, it must provide:
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