Cayman Islands: Country and Foreign Investment
This page was last updated on 27 June 2019.
The Cayman Islands (informally known as the Caymans or Cayman) is a British overseas territory situated in the Caribbean Sea - south of Cuba and west-north-west of Jamaica. There are two international airports, one in George Town, Grand Cayman and the other on Cayman Brac. Several major airlines fly to the Caymans and there are daily flights to Miami and weekly flights to major North American and European cities.
The Caymans are politically stable. According to the 1972 constitution, the governor represents the British monarch and assigns portfolio responsibilities to five elected ministers of government, although the constitutional relationship between the Cayman Islands and the UK is currently evolving.
There are no taxes in the Cayman Islands; government revenue comes from custom duties, stamp duty and annual fees levied on corporations. The population of 63,100 (June 2019 estimate) is mainly of mixed British and Jamaican stock, though there are more than 70 nationalities in the workforce. The economy is highly dependent on tourism, though financial services are also important.
There are currently 149 banks in the Cayman Islands (around 70 were closed down recently.) Nonetheless, with deposits worth about US$1.5 trillion, Cayman is the one of the largest offshore banking centres in the world. It is also the second largest captive insurance base after Bermuda, with assets worth USD82.8bn. The Cayman Islands trust sector is thought to manage more than USD500bn. Mutual funds are a growing sector, especially since the opening of the Cayman Islands Stock Exchange in 1997. The territory has emerged as a predominant registration base for hedge funds, collateralised debt obligations and other securitisation instruments have also taken a firm hold.
The Caymanian dollar (KY$) is fixed against the US dollar at KY$1.00 to US$D1.20. There are no exchange controls. 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.
Cayman seemingly has quite a good reputation in the Western hemisphere, while in Europe it often exemplifies tax havens, though is now to some extent a media stereotype. Cayman has acceded to international pressure on offshore centres to keep themselves clean, implementing many statutes. In 2001, the jurisdiction even allow investigation of financial wrongdoing, at least when there is evidence of criminal behaviour, both in Cayman and abroad. However, the prevailing attitude in Cayman is to protect confidentiality when no criminality has been demonstrated.
The Cayman Islands was then briefly included on the Financial Action Task Force (FATF) list of jurisdictions with inadequate defences against money laundering. However, in 2001 the Cayman Islands was praised by the FATF for its substantial efforts to conform to 40 of its recommendations set out in a code of good practice governing money laundering, including the issue 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. 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.