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Kenneth Rijock: Proposed Cayman Islands register of beneficial owners has no teeth

By Kenneth Rijock From Caribbean News Now

The proposed Cayman Islands Register of Beneficial Ownership of Corporate Information, which is reportedly slated to become effective in June 2017, and which was created in the face of global demand for corporate ownership transparency, falls far short of its goals.

First of all, outside of United Kingdom regulators and law enforcement agencies, nobody else will have access. The United States, which has a critical interest in learning which of its taxpayers are using Cayman entities to evade American taxes, is curiously out of the loop at this time, as are law enforcement agencies of the EU, who need access. Though there is language stating that such agencies will have access, no others are even hinted at.

Second, it is not a publicly accessible database, meaning that no compliance officers at banks can conduct due diligence through it. I can understand privacy concerns, but potential financial crime trumps such issues, in my book.

Third, the method through which the Cayman companies identify their beneficial owners is flawed: asking the company itself to correspond with, and receive back “information” regarding who is a beneficial owner, and relying upon that data? Come on, only licensed professionals, meaning attorneys and accountants, who have something tangible to lose for misconduct or negligence, can be trusted with verifying beneficial ownership of a client, not the fox in the hen house.

What we will most likely see is the total failure of probable beneficial owners to verify their status to the corporation making the inquiry, which is to be expected, and the corporate officers duly reporting and relying upon that failure to disclose, and not designating the true ultimate beneficial owners.

Is it all smoke and mirrors in response to the Panama Papers scandal regarding opaque offshore companies? You be the judge but, in my humble opinion, the Cayman Register is little more than a snow job, perpetrated at the expense of the world’s tax authorities.

IMAGE: Kenneth Rijock is a banking lawyer, turned career money launderer for ten years, turned compliance officer specialising in enhanced due diligence, and a financial crime consultant. His autobiography “The Laundry Man” was published in the UK on 5 July 2012

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