A debate over pulling back the veil of secrecy over who owns companies registered in the Cayman Islands has started with a public consultation.
Governments outside the Caymans have accused the Caribbean sunshine isle of making money as a haven for shady companies and tax evaders.
However, The British Overseas Territory is working hard to brush up its tarnished financial image by pulling back the curtain on secret company directors, bank accounts and trusts to reveal the full extent of ownership and wealth held on the islands.
Revealing tax secrets
The Caymans government has taken some major steps in recent months to shed the tax haven image:
- The Caymans has signed an inter-governmental Foreign Account Tax Compliance Act (FATCA) agreement with the United States guaranteeing to identify American account holders and to report their financial information to the Internal Revenue Service (IRS)
- A similar agreement was signed with UK to transmit financial information about British taxpayers hoarding their wealth in secrecy on the islands
- The government is also looking to sign tax information exchange treaties with major nations
Cayman Islands Financial Services (CIFS), the island’s trade body for financial firms, wants to know what the financial sector, banking and investment customers and islanders think about making details of the beneficial ownership of companies registered on the island public.
Revealing beneficial ownership will show who the anonymous owners who get the profits from companies based on the island really are.
Currently, company registers only list ‘shadow directors’ who are paid to shield the identity of the real owners.
Tackling financial crime
Companies House in the UK has been tasked with managing a database of companies based on crown dependencies and overseas territories around the world, including the Caymans.
“Transparency is important for our business, both on the islands and on a global scale, because it helps monitor financial crime,” said a CIFS spokesman. “Openness about beneficial ownership protects investors and public revenue. Transparency also generates public trust in the integrity of our financial services and increases confidence in the stability of the Cayman Islands as a safe jurisdiction for financial businesses.”
Independent reviews by international bodies like the Financial Stability Board and the Financial Action Task Force have already given the Cayman regulators a clean-bill of health for their procedures to tackle money laundering and other financial crimes.
“We will continue to evaluate further proposed changes in light of the intended benefits to law enforcement and tax authorities, the costs of implementation, and the potential impact on our competitive position,” says CIF.