Cayman Finance open to engage Labour on ownership issue
Jude Scott, CEO Cayman Finance
(CNS Business): As the May election period for the UK approaches, the opposition Labour party remains adamant about enforcing a centralized and public beneficial ownership register on British territories if it forms the next government. CEO of Cayman Finance, Jude Scott, told CNS Business that everyone needs to be cognizant about the elections and said he welcomes discussions with the Labour party if they feel they have questions or concerns about how the Cayman Islands system works.
The UK’s Leader of the Opposition, Ed Miliband, stated recently that if any overseas territory or crown dependency did not “open their books” within six months of a Labour government, they would ask the Organisation for Economic Co-operation and Development to put them on the OECD’s tax haven blacklist.
However, Scott pointed out that Cayman’s financial industry already has a very strong system in place, which is far superior to what is being suggested. He said the idea of a beneficial ownership registry would be very detrimental to the industry because it’s a lower quality system to what is already being used in the Cayman Islands.
He said that if Labour’s position on the issue is “from the standpoint of not having a good understanding on what is actually done here, we are happy to work through that so they have a better understanding, so they really see this is a world class system in achieving what we are all trying to do to prevent these negative things like terrorism financing.”
The CEO of the umbrella organisation representing Cayman’s financial services elaborated that the jurisdiction already has the proper supervision in place for corporate service providers as a means of conducting effective data collection and, in particular, verifying client identity. However, he explained that the proposed register takes it too far.
“When you’re talking about beneficial ownership, right now the context is with things like entities and companies and other types of structures, but when you look at the parallel to that, it would be financial information like your bank account information. So you’re asking any ordinary, regular, hard-working person or a high net worth person, would you be comfortable with your personal financial information being available to anyone in the world to look at as they wish?”
Scott told CNS Business there are certain aspects of an individual’s business that should be private and personal. The consequences of a public register would be that not only could legitimate authorities access it but also people who have bad intentions, he pointed out. “And then honest people who have genuine reasons to have these structures are now at risks from threats around the world.”
The current system in place for the Cayman Islands requires, by law, a validation process to ensure that all clients they are doing business with are not involved with tax evasion, money laundering or financing terrorists, he explained.
“Our service providers who are interacting with these clients are required to actually collect certain and specific information to satisfy them that they have complete information on who the beneficial owners are regarding these different entities and transactions,” he noted. “This allows us to have a very strong platform. It allows us to make sure we have completeness, accuracy and the information that’s sitting in our databases is validated.”
He said, “What is being suggested, asked and possibly imposed on the Cayman Islands is to really totally revamp what we are doing, which is a very effective system, and instead put a system in place which is being pushed by various NGOs to drive things on a key focus — that they want to have a public central registry of beneficial ownership.”
In addition, the proposed system would be based on self-reporting who the beneficial owners are of the company, with no requirement for validation, completeness or updating.
“So when you compare the system that the Cayman Islands has in place, which is that you’re not by law allowed to transact business until you know who the beneficial owners are and that information has been validated, to the model that is trying to be imposed, which basically said we are just going to rely on businesses to self-report, then we have to ask ourselves when we go through the lists of what we are trying to prevent, like terrorist financing and money laundering, do you think someone who is involved in that type of activity is going to accurately self-report?”
Scott said the government and the financial services industry recognise Cayman’s important role in the global financial market. He stated that this jurisdiction has consistently evolved and maintained its practices to meet robust, balanced and globally implemented standards.
The initiatives that Cayman has engaged in regarding the automatic exchange of information for tax purposes and developing the technology to do that are very positive, he said. “I think that level of transparency is very helpful, because that information is now appropriately being reported to authorities in other countries who can appropriately use that information.”
However, the Cayman Islands Government went through a full consultation process regarding a central register of beneficial ownership information and looked at both the proposed system and laws in place now. The CIG concluded it would not implement the register but would work to enhance the current system.
“So the government responded to UK that they felt the system we had was a very strong system and really best in class, and that what was being proposed was not a system we felt was in the best interest of the jurisdiction, that it would actually not provide even as good quality information as to what we currently have,” he stated.
Scott said that the industry and Cayman Finance fully supported the government’s position.
At the end of the day, he said, both they and the proponents of a central registry are trying to prevent negative things from happening in the financial industry but it’s all about having the right balance and appropriate level of transparency.
“I always believe that the UK is our mother country and we will always and should always act with proper respect. As long as we keep acting in that behavior and we are fully transparent in how we are communicating, and the reasons behind our decision, I believe that we will find a good strong middle ground with the UK,” Scott said.
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