Letter from the Cayman Isles
The Honourable Leader Of Government Business, Mr. Kurt Tibbets JP
23 April 2009
The Government Administration Building
I write with a degree of urgency following the meeting of the Executive of the Cayman Islands Financial Services Association at which transactional deal flow to the Cayman Islands was evaluated in the light of the inclusion of the Cayman Islands in the current OECD "Grey List". There was unanimous concern expressed at the immediate and negative responses being received on a daily basis from clients and hard evidence of determinations having been made by institutional clients now not to use the Cayman Islands, rather to favour "White List" competitor jurisdictions.
We bring this to your attention because we are afeared that if all immediately available steps are not taken to remedy the current position accelerating and irreversible damage will be done to the Cayman Islands financial industry. Once relationships are established by institutional clients in alternative jurisdictions we doubt that Cayman will be able to compete effectively for future business from that institution thereafter. It is a regrettable but unquestionable fact that legislative improvements based on Cayman model legislation have rendered such jurisdictions highly competitive. The overall concern is heightened because this occurs at a time when there are fewer institutional clients and, as a consequence of the global recession, statistics for Q1 indicate that overall transactional flow may be down by as much as fifty percent in any event. This will unquestionably soon have dramatic repercussions in terms of local employment statistics.
CIFSA is fully understanding of and remains fully supportive of CIG's effort to secure immediate recognition of the unilateral mechanism. But given that there now exist grounds to conclude that the viability of the entire financial industry is at stake, as an exercise in risk management, we consider it essential that CIG immediately undertake two specific further steps.
1) To implement immediately four additional bilateral treaties either a) by delivering signed forms of Treaty in the OECD model form forthwith to any four jurisdictions currentl designated in the unilateral mechanism or b) delivering signed treaties without a counterparty designated in the model form to the OECD. For the record in the current circumstances CIFSA now places no value whatsoever on whatever may have been considered to be the negotiated treaty benefits available in consideration for the execution of those treaties. At best the value of these benefits are intangibles. The daily damage now being sustained by the Cayman financial industry is verifiable.
2) We recommend two amendments to the Confidential Relationships Preservation Law. We recognize that the House is not in session but suggest an announcement of legislative intent would have similar public relations effect. Firstly we would recommend that the criminal law sanctions be repealed leaving the structure of the law in place (so as to cause no disruption to cross references in transactional documents.) Secondly we suggest an amendment to section 3(2) that specifically states that the CRPL is subject to requests for tax and criminal information that are made pursuant any bilateral tax treaty, the unilateral mechanism or any mutual legal assistance treaty.
We are fully sympathetic to the current difficulties that arise consequent upon the election process and CIFSA would wish to remain constrained from comment during a sensitive period. But we are concerned that the current constititional hiatus should not be alowed to contribute to any delay in resolution with the result that incremental damage is inflicted on the financial industry. Furthermore the real time commercial exigencies are such that pressure from clients is rendering the current position of professional advisers in the financial industry untenable. Whilst the intention is to express every confidence in the CIG position typical client reaction varies from extreme scepticism to non acceptance of assurances and adverse conclusions as to the outcome are being drawn. As the representative of the private sector we feel an obligation to bring the current position to your immediate attention since we now doubt that the Cayman Islands financnai lindustry can withstand a lengthy review process by the OECD without sustaining irreparable harm. We would be happy to discuss in conference and would respectfully request a meeting this week.
Subject thereto we would be pleased to provide technical drafting assistance to help resolve the sitution.
Cayman Islands Financial Services Association
Cc: HE The Governor
Honourable Members of Cabinet.
Update: see more on Cayman and confidentiality here.