Caymen Islands Executive Summary

Cayman Islands Executive Summary

The Cayman Islands are an English-speaking Dependent Territory of the United Kingdom, located in the Caribbean between Cuba and Central America. There are two international airports, one in George Town, Grand Cayman and the other in Cayman Brac. Several major airlines fly to Cayman and there are daily flights to Miami and weekly flights to major North American and European cities.

Cayman is politically stable; under the 1972 constitution, the Governor represents the Queen and assigns portfolio responsibilities to five elected Ministers of government, although the constitutional relationship between the Cayman Islands and the UK is undergoing change. There are no taxes in the Cayman Islands: government revenue comes from customs duties, stamp duty and annual fees levied on corporations. The population of almost 48,000 is of mixed British and Jamaican stock, with more than 70 nationalities present in the work-force. The economy is highly dependent on tourism, with financial services also important.

Cayman is the largest offshore banking centre in the world with about 280 banks and deposits worth about USD1.7 trillion. It is the second largest captive insurance base after Bermuda, with assets worth USD20 bn. The Cayman Islands trust sector is thought to manage more than USD500 bn. Mutual funds are a growing sector, especially since the opening of the Cayman Islands Stock Exchange in 1997. The Cayman Islands have emerged as a predominant registration base for hedge funds; CDO and other securitization instruments have also taken a firm hold.

The Caymanian dollar is fixed against the US dollar at CI$1.00 to USD1.20. There is no exchange control. Cayman is an expensive jurisdiction with an established commercial infrastructure in place and a flexible approach to regulation, within its strong desire to maintain respectability.

The Cayman Islands have quite a good reputation in the Western hemisphere, but in Europe have tended to exemplify 'tax havens', largely perhaps as a media stereotype rather than as a matter of objective reality. The truth is that Cayman has tried hard with a large number of statutes to keep up with the international pressure for offshore centres to keep themselves clean, even accepting in 2001 the need to allow investigation of fiscal wrong-doing, at least when criminality is in evidence both internationally and in Cayman itself. The prevailing attitude in Cayman however is still to protect confidentiality in the absence of demonstrated criminality.

Although the Cayman Islands was briefly included on the FATF list of jurisdictions with inadequate defences against money laundering, in 2001 the Cayman Islands was praised by the FATF for its substantial efforts to conform to forty recommendations set out by the FATF in a code of good practice governing money laundering, including the issuance of money laundering regulations and amendments to the Monetary Authority Law and the Proceeds of Criminal Conduct Law. Amendments have also been made to the Banks and Trust Companies Law and the Companies Management Law; and compulsory licensing for financial firms was introduced in late 2002.

The Savings Tax Directive, which went 'live' in July, 2005, appears to have had little impact on the Cayman Islands financial services industry.

CAYMAN ISLANDS: EXECUTIVE SUMMARY

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Cayman Islands Executive Summary