The veil of secrecy over financial dealings of the wealthy in the Cayman Islands is lifting for the first time.
In a bid to give the Caribbean islands a makeover to attract foreign investment, the authorities are ready to open company and hedge fund registers to the public – and the names of their directors.
The government fears financial secrecy laws are tarnishing the image of the islands and are attracting accusations that companies based there evade tax and are involved in money laundering.
The move comes as the US with its FATCA act and the upcoming British law – known as ‘Son of FATCA’ – is about to be unveiled which will compel financial institutions in British dependencies and overseas territories like the Caymans to reveal details of which British taxpayers have accounts there.
It comes as other offshore centres have announced plans to unveil who is holding funds in their financial institutions, most notably the Isle of Man.
Companies and hedge funds exposed
Now, the Cayman Islands are the next to break with decades of banking secrecy by opening up a database of companies and hedge funds.
News of the move comes after The Financial Times claims to have seen a note sent to hedge fund businesses by the Cayman Islands Monetary Authority (CIMA).
There is a consultation period which ends in March, and among the reforms is for directors to be vetted before taking up roles as agents for investors.
CIMA declined to comment on the proposals, but in one document outlined that several other offshore centres had updated their corporate governance laws and regulations since the financial crisis of 2008.
The Cayman Islands hit the headlines last year when it was revealed that US presidential candidate Mitt Romney held a large chunk of his wealth on the island but the secrecy laws prevented an investigation.
This was the latest in a long line of international criticisms aimed at the island’s lack of transparency
There was also an issue highlighted two years ago with revelations that some directors were sitting on the boards of hundreds of hedge funds – calling into question their abilities to oversee the companies concerned.
However, a spokesman for the Tax Justice Network (TJN) pointed out: “Among the proposals we see no sign that the Cayman Islands is planning to end its secrecy laws such as the Confidential Relationships (Preservation) Law, for instance.
“Pressure for the Cayman Islands to reform has been intense from media and governments but the tax haven has also been struggling with massive corruption scandals and its own financial problems.
“We need to see serious the proposals are but on the evidence so far, it does look promising.”