The Cayman Islands Government today (December 30 2014) issued a report stating that it will continue its current method of providing beneficial ownership information to law enforcement, tax and regulatory authorities, as the method adheres to global standards.

As explained in its Consultation Report on Maintenance of Legal and Beneficial Ownership Information, Government’s decision was based in part upon responses from local and international companies, individuals, and non-governmental organisations, given during a public consultative period held from 15 November 2013 to 28 February 2014. The consultation was conducted by the Ministry of Financial Services and Commerce.

In the report, Government notes that the Financial Action Task Force (FATF) Recommendations outline three avenues by which a country can comply with the global availability of information standard.

Minister of Financial Services and Commerce, Wayne Panton, said the UK is now taking steps to adhere with the standard via one of these avenues, by consolidating information into a central register; and that the UK has been in discussion with its Crown Dependencies and Overseas Territories regarding whether central registers should be implemented in their jurisdictions as well.

However, Minister Panton noted that Cayman has been adhering to the global standard for more than a decade, by providing this information to law enforcement, tax and regulatory authorities from data collected, verified and maintained by licensed and regulated corporate service providers.

‘Both of these methods are acceptable under the FATF Recommendations’, Minister Panton said.

Government’s report also notes that although they are global in nature, the FATF Recommendations allow jurisdictional flexibility — not in the intended outcome of the recommendations, but in how that outcome is achieved.

Furthermore, Cayman’s CSP regime adheres to the core set of principles in the G20’s High-Level Principles on Beneficial Ownership Transparency, which was issued in November this year.

For these reasons, Government states in its report: ‘Until such time as there is global agreement on appropriate exemptions and safeguards, and this becomes the internationally practiced standard, the Cayman Islands will continue to follow its CSP regime’.

Also in the report, Government outlines steps that it will take to further strengthen Cayman’s framework through enhanced accuracy, access, availability and monitoring/enforcement of ownership information.

 

 

Cayman Islands Consultation Report on Maintenance of Legal and Beneficial Ownership Information 2014

 

Introduction

From 15 November 2013 to 28 February 2014, the Ministry of Financial Services sought public feedback on sections 2, 3, and 6 of the Cayman Islands Action Plan to Prevent the Misuse of Companies and Legal Arrangements. The Ministry conducted the public consultation on behalf of the Cayman Islands Government.

In recognition of the Cayman Islands’ contribution to the global economy, the consultation was open to the public, both locally and internationally, in order to provide an opportunity for broad representation.

This report summarises the consultation responses; and outlines the Government’s current position, and proposed action points, on the following matters:

• legal and beneficial ownership (section 2 of the Action Plan/consultation document);
• a central register of beneficial ownership information (section 3); and
• corporate transparency (bearer shares), (section 6).

 

The Action Plan is attached as Annex 1, and the consultation document is attached as Annex 2.

Respondents’ Profile

The Ministry received 43 responses to the public consultation, including submissions from individuals; foreign non-governmental organisations (foreign NGOs); local organisations and associations (local NGOs); and local and foreign companies.

 

Legal and Beneficial Ownership

Overview of Consultation Responses

The purpose of section 2 of the consultation document was to determine the public’s views on whether Cayman’s policies and legislative measures ensure that information on the ownership and control of companies and express trusts continues to be effectively and accurately collected, and maintained; and if this information continues to be readily available to the appropriate authorities.

Of the 43 respondents, 31 indicated that Cayman’s collection and maintenance of beneficial owner information was effective and satisfied international standards at the time of Cayman’s most recent AML assessment.

See Figure 3

More than 70% of the respondents to this section noted that Cayman’s measures are quite robust and are at a level of compliance beyond those of other jurisdictions – including key onshore jurisdictions where in some cases, beneficial ownership information is not collected or maintained at all. However, three foreign NGOs responded that Cayman’s regime was insufficient, and could be significantly enhanced through a public beneficial ownership registry, as well as automatic exchange of information (AEOI) relationships for tax purposes with developing countries

Government’s Response

The Government notes that, although the Cayman Islands has not experienced disproportionate occurrences of financial crime, we will continue to evaluate our legal and beneficial ownership regime and implement improvements in order to mitigate and, if it were possible given the inventiveness of criminals, to eliminate abuses of our system.

Continuing to improve our system, in ways that support sound business growth locally and globally, therefore remains our position; it simply is the right thing to do.

The results of this consultation, as well as previous third-party assessments, have assisted Cayman in identifying areas for enhancement in our legal and beneficial ownership regime, which are set forth in the conclusion of this report.

 

Central Registry of Beneficial Ownership Information

Overview of Consultation Responses

Section 3 of the consultation document solicited feedback regarding whether a central registry is the most appropriate and effective way to improve transparency in the Cayman Islands.

To this question, 81% of the respondents said they were not in favour of a central registry of beneficial ownership information, or of access to such a registry by the public.

See Figure 4.

 

Conclusion and Next Steps

 

Government acknowledges the usefulness of this consultation, on the Cayman Islands Action Plan to Prevent the Misuse of Companies and Legal Arrangements, in informing our continuing programme of enhancements that ensure our regime meets local needs, and also fully complies with practised global standards.

Our broad approach to the consultation was in line with our firm belief that solutions to illicit activity, including corruption and exploitation of the natural resources of developing countries, will be found only through constructive engagement.

We recognise and, more importantly, understand the rationale behind the increasingly convergent nature of global regulatory initiatives.

For example, our position on the value of these initiatives is evident through our engagement and responsiveness to the following tax initiatives:

 

• US FATCA and UK FATCA;
• being an early adopter to the Common Reporting Standard (including the Cayman Islands signing of the multilateral agreement on automatic exchange of information in Berlin on 29

October 2014);

• our high-level participation in the Global Forum for Transparency and Exchange of

Information for Tax Purposes; and

• the extension to Cayman of the Convention on Mutual Administrative Assistance in Tax Matters.

 

As indicated above, recent international initiatives and our public consultation process have given Government an opportunity to evaluate Cayman’s current AML and Know Your Customer regime, as it relates to the issue of transparency of beneficial ownership of Cayman Islands companies and arrangements. Upon such evaluation, Government acknowledges that, like any sound system or model in operation for many years, there are aspects that can be strengthened in order to tackle the misuse of legal persons and arrangements for illicit purposes such as corruption, tax evasion and money laundering.

In addition, Government is committed to adhering to the core set of principles as set forth in the G20’s High-Level Principles on Beneficial Ownership Transparency, and we will continue to monitor other international developments, including the European Union Fourth Money Laundering Directive.

Accordingly, in 2015 Government proposes to enhance the current framework to uphold such principles, and to take actions that will assist with the elimination of wrongful uses of legal persons and arrangements, while enhancing accuracy, access, availability and monitoring/enforcement of ownership information.

By mid-2015, Government also proposes to complete its National Risk Assessment, which should identify any further areas for improvement that can be addressed.

Government’s proposed initial actions are as follows.

 

Accuracy/Current Information

Government proposes to:

 

• amend the Cayman Islands Companies Law to abolish bearer shares;
• codify express definitions of ‘beneficial owner’ and ‘control’1; and
• improve the reliability of the eligible introducers regime.

 

Access

To enhance access to beneficial ownership information by tax, regulatory and law enforcement authorities, Government proposes to:

• enact legislation that will require CSPs to produce beneficial ownership information to tax, regulatory and law enforcement authorities within a target turnaround time of 24 hours in circumstances where such information is required.

 

Availability, Monitoring and Enforcement

Government proposes to:

 

• require an annual filing of legal ownership information of Cayman Islands exempted companies with the General Registry of the Cayman Islands by their corresponding CSPs (akin to the annual filing already required of Cayman Islands ordinary resident companies), with appropriate exemptions (e.g. publicly listed or regulated companies);

 

[1 It is further noted that a codified definition may need to be adopted for each type of entity in order to reflect the legal and/or practical differences between companies, partnerships and trusts.]

• require CSPs to designate a natural person locally to be accountable to Cayman Islands authorities for the availability of ownership information and the monitoring/testing thereof at specified intervals; and
• enact legislation to allow relevant Government agencies/authorities to wind up an entity (either regulated or unregulated) that has not complied with legal or beneficial ownership requirements within a specified timeframe.

 

Government will continue its programme of active engagement with local and international stakeholders; develop subsequent improvements to our business model; and ensure that our authorities effectively cooperate, both domestically and internationally, so that our jurisdiction continues to provide an efficient platform for legitimate business, which is the only type of business we welcome to the Cayman Islands.

 

The Cayman Islands Government

Action Plan to Prevent the Misuse of Companies And Legal Arrangements

 

Tuesday, 18 June 2013

 

The Cayman Islands is committed to continue working with other nations towards the full implementation of the revised Financial Action Task Force (FATF) standards, in order to improve transparency of the ownership and control of companies in a way that ensures a level playing field across the world. This is a matter of good governance, as well as a means to tackle a wide range of illicit activities.

Collection and maintenance of beneficial ownership information by corporate service providers and trustees of express trusts has been a legal requirement in Cayman for more than a decade. The obligation on trust and corporate service providers to collect, update and retain such data is enforced through a regime that mandates a licensing process for trust and corporate service providers, and an ongoing programme of supervision and enforcement action that involves onsite regulatory inspections.

The Cayman Islands supports the high standards set by the revised FATF recommendations, including recommendations 24 and 25, and is committed to continue making progress towards the full implementation of these standards by undertaking the following actions.

1. Conduct, and share the findings of, a national assessment of money laundering and terrorist financing risks by 2015, through co-ordinated action by the public and private sectors to assess risks, apply resources and mitigate those risks.
2. Further evaluate established policies and legislative measures to ensure that information on the ownership and control for companies and express trusts continues to be effectively and accurately maintained, and that this information continues to be readily available to the appropriate authorities.
3. Conduct an assessment of whether a central registry of the beneficial ownership and control of companies is the most appropriate and effective way to improve transparency in support of domestic legal compliance and the implementation of cross border assistance in accordance with internationally adopted and implemented standards during 2015.
4. Continue the longstanding supervision of those who execute company formation in the Cayman Islands, and keep the regulatory regime under review.
5. Conduct a review of supervision and regulation of the financial services sector, including category A and B banks, during 2015 to establish effectiveness of supervision and enforcement of existing rules on beneficial ownership.
6. Further review corporate transparency including the use of bearer shares (all of which are already immobilised and subject to regulation in the Cayman Islands) as recommended in the Phase 2 Peer Review Report by the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes, by 2014.
7. Maintain our high standards of international cooperation, including the timely and effective exchange of basic and beneficial ownership information on legal persons and arrangements.
8. Continue to negotiate and enter into international tax cooperation agreements and arrangements under the entrustment of the United Kingdom, where appropriate, including tax information exchange agreements and double taxation agreements; intergovernmental agreements in support of automatic exchange of tax information (such as under the United States Foreign Account Tax Compliance Act); and the Convention on Mutual Administrative Assistance in Tax Matters.

To view and download the whole 41 page document go to: http://www.caymanfinance.gov.ky/pls/portal/docs/PAGE/PRUHOME/PRESSROOM/2014/BENEFICIAL-OWNERSHIP-CONSULTATION-REPORT-2014/BENEFICIAL%20OWNERSHIP%20CONSULTATION%20REPORT%20-%2030-DEC-2014.PDF

Related story:

Cayman Rejects Beneficial Ownership Registry

by Mike Godfrey, Lowtax.net, Washington

The Cayman Islands has published a new report stating that, while it will not introduce a central registry of information on the beneficial ownership of companies, it will tighten up its beneficial ownership regime in other areas.

The report follows industry consultation between November 2013 and February 2014 and broadly concludes that the territory’s existing regime is adequate and already complies with international standards and in particular the recommendations of the Financial Action Task Force (FATF).

Under the current system, Corporate Service Providers (CSPs) have been required to maintain details of the beneficial owners of companies since 2000. The report notes that this information is already available to law enforcement and tax and regulatory authorities upon request.

The Cayman Islands is to make a number of changes to its arrangements this year however. The key changes proposed include the banning of bearer shares (negotiable instruments that accord ownership in a legal person to the person who possesses the bearer share certificate, which have been immobilized since 2001), and a new requirement for CSPs to designate a natural person resident in the Cayman Islands to be responsible for responding to requests for beneficial ownership information and the monitoring and testing of information held at specified intervals.

The report also includes an undertaking to enact legislation requiring CSPs to produce beneficial ownership information to tax and legal authorities within 24 hours; to codify a definition of relevant terms such as “beneficial owner” and “control;” and to enable Government agencies and authorities to wind up an entity (either regulated or unregulated) that has not complied with legal or beneficial ownership requirements within a specified timeframe.

 For more on this story go to: http://www.lowtax.net/news/Cayman-Rejects-Beneficial-Ownership-Registry_66878.html