The World Media reports...
Is the Cayman Islands a'Black Hole'?
Still reeling from the confusion and misunderstanding surroundingthe OECD and White Paper discussions raging through the country,the Cayman Islands was dealt another blow this week with the publicationof a report by the G7's Financial Stability Forum (FSF).
This is the crude term is used by the Toronto Globe and Mail newspaperin a report which states that the countries which make up theG7 - now really G8 (the acronym comes from a Group of the world'slargest economies - France, the United States, Britain, Italy,Japan, Canada, Germany and Russia meet to decide on which wayall other countries on this planet should jump .. when they speak.
The international media is having a heyday with this latest barrageof accusations of these big industrialized nations - who no doubtare jealous of Cayman's standard of living and its ability tocontinue attracting wealthy, global companies - and individualsto park - and operate a sizable amount of their finances and internationalbusiness from right here in the Cayman Islands.
In the 80's, when the reality was set in that Hong Kong was goingto revert to being ruled by Communist China, one of that internationalbusiness centre's largest trading Companies - Jardin Matthewson,pulled out lock, stock and barrel and moved its operations toBermuda.
Following on the heels of Jardin, Sir John Goldsmith's multi-billiondollar financial empire in Hong Kong moved to the Cayman Islands- and was accommodated by the Government of the day - who helda special sitting of the Legislative Assembly, to allow this companyto trade almost carte blanche from these shores.
These are just two examples - there are hundreds more - of globalconglomerates, who snubbed their noses at Hong Kong and otherTax Planning countries of the world, choosing instead, the CaymanIslands to domicile their companies - over longer term bankingcentres such as Switzerland, Bermuda and the Bahamas.
Now, pressure is being put on our 'Mother Country' England, forCayman to compromise its success by complying with laws and regulations- particular in terms of Financial and Administrative compliance'sof other countries, which are alien to this territory's charterswhich have revolutionized its scale of economies - thereby permittingthe country to prosper, while theirs continue to deteriorate.
The listing of the Cayman Islands, along with other countriesas one of the 'blackholes' of Financial management, should beviewed as yet another attack, because, they are sponsoring "effortswhereby the G7 hopes (such) reports will embarrass countries (notlisted) from cooperating with them."
These very countries, including Cayman, named to the 'blackholes'- are among those whose economies are built on tax planning. Theyare not responsible for the taxes put on the backs of the citizensof G7 or the extension 27-member OECD.
The following are a few of the many reports filed by the worldpress in connection with this latest development:
Toronto Globe and Mail
Heather Scoffield
"If you're still looking for a foreign country to stash yourmoney, avoid high taxes or hide your wealth from the courts, financialregulators from the world's richest countries have prepared alist for you. The most unregulated financial institutions in theworld are mainly in Central America and the Caribbean islands,but Liechtenstein and Lebanon also make the list released yesterday.
"The list was put together by representatives of the Groupof Seven (G7) industrialized countries and from internationalfinancial institutions as part of a study on the weakest linksin the global financial system.
"The most relaxed regimes in the world, according to theFinancial Stability Forum, include Antigua, Aruba, Belize, CaymanIslands, Costa Rica, Lebanon, Liechtenstein, Mauritius, Panama,Bahamas, and Turks and Caicos.
"These countries have such low standards that they "createa potential systemic threat to global financial stability,"the forum's report says.
"Such offshore financial centres constitute weak links inan increasingly integrated international financial system andhinder broader efforts to raise standards of soundness and transparencyin the global financial system," the (G7) report says.
"The forum hopes that by releasing the names of the worst"regulatory black holes," those countries will be embarrassedinto joining the international effort to improve regulation offinancial institutions, said John Palmer, Canada's Superintendentof Financial Institutions, who led the working group that wrotethe study for the forum.
"The study divided the regimes into three groups, accordingto how lax their standards are.
"The worst offenders have a long way to go before they evenhave the willingness or the capacity to bring their rules intoline with the rest of the world, Mr. Palmer said.
"These countries "really exist to attract foreign businessby offering lower standards [and] don't seem to be willing tojoin this international effort to raise the bar," he saidin an interview. "We're concerned that if they don't . .. companies, individuals [and] capital simply flee to these regulatoryblack holes."
"The second group, which is not as worrisome as the worstoffenders but still has deep problems with financial regulation,includes Andorra, Bahrain, Barbados, Bermuda, Gibraltar, Macau,Malta and Monaco.
"A third group of countries is still considered offshorefinancial shelters, but they have strong enough laws and supervisionso as not to cause a threat to the world's financial stability,the study says. This group includes Hong Kong, Luxembourg, Singaporeand Switzerland"
The Calgary (Canada) Herald
Eric Beauchesne
"International financial authorities have taken the unprecedentedstep of publicly naming the black holes of the global financialsystem out of fear that some offshore financial centres, unlessopened to outside scrutiny, could spark another world financialcrisis.
"The Swiss-based Financial Stability Forum, made up of bankingwatchdogs from industrial countries and organizations such asthe International Monetary Fund, will today publicly name thoseoffshore financial centres, including notorious tax havens suchas the [Cayman Islands], Liechtenstein and Panama, that pose apotential risk to the future stability of the global financialsystem.
"Opening the supervision of their banking systems to outsidescrutiny is important and urgent, said Canada's banking regulatorJohn Palmer, who headed a working group that probed the adequacyof such supervision within offshore financial centres throughwhich investors -- and criminals --quietly funnel much of theworld's accumulated wealth.
"There's been a massive global movement to improve the qualityand openness of the supervision and regulation of domestic bankingsystems and international financial flows in the wake of the Asianand other international financial crises.
''But there are some jurisdictions that are really not part ofthis,'' Palmer said. ''What it means is that as we tighten upstandards . . . capital can flee to these regulatory black holes.And our efforts then are in vain.
''Some of these offshore jurisdictions really matter,'' he stressed.''Very large percentages of the world's assets and liabilitiesare on the books of financial institutions or companies or truststhat are located in these offshore financial centres.''
"And it's very difficult to get information about the financialsupervision in some of these centres.
Palmer, however, said the Financial Stability Forum is not interestedin undermining the tax haven status because that is not a threatto global financial stability, though he noted that tax authoritiesmight.
"But it hopes shining the light on those that haven't co-operatedin the wave of global financial reforms will underscore the importancethe global community attaches to proper regulation and supervisionof all financial centres.
"Offshore financial centres, whose attraction is often theshelter they offer clients from both the taxes and the pryingeyes of the authorities in their own countries, are not a threatto global financial stability provided they are well supervisedand seen to be.
''At the same time . . . offshore financial centres that are unableor unwilling to adhere to internationally accepted standards forsupervision, co- operation, and information sharing create a potentialsystemic threat to global financial stability,'' it stressed "Thosecentres, the report said, ''are the weak links in an increasinglyintegrated international financial system and hinder broader effortsto raise standards of soundness and transparency in the globalfinancial system.''
"The offshore financial centres were ranked into three groups,depending in part on their willingness to co-operate with internationalfinancial authorities in opening up their regulatory and supervisorysystems to outside scrutiny."
The Swiss-based Financial Stability Forum wrote ...
Ranked nations according to their willingness to co-operate withinternational authorities in opening up their regulatory and supervisorysystems as follows:
The Good
- Hong Kong, Luxembourg, Singapore and Switzerland.
The Bad
- Andorra, Bahrain, Barbados, Bermuda, Gibraltar, Labuan Malaysia,Macau SAR, Malta and Monaco; and
The Ugly
- Anguilla, Antigua and Barbuda, Aruba, Belize, British VirginIslands, Cayman Islands, Cook Islands, Costa Rica, Cyprus, Lebanon,Liechtenstein, Marshall Islands, Mauritius, Nauru, NetherlandsAntilles, Niue, Panama, St. Kitts and Nevis, St. Lucia, St. Vincentand the Grenadines, Samoa, Seychelles, the Bahamas, Turks andCaicos and Vanuatu."
The Financial Times of London
Michael Peel and John Willman ...
"Some of the world's leading offshore financial centres havebeen warned to improve supervision and co-operate with other regulatorsto avoid being frozen out of the international financial system.
"The Financial Stability Forum yesterday published a listof 25 offshore financial centres (OFCs) whose standards of supervisionand transparency put them in the worst of three groups gradedaccording to the risk they pose to financial stability.
"They include the Bahamas, Cayman Islands and British VirginIslands - all in the Caribbean, Liechtenstein in Europe, Panamaand Belize in central America and Lebanon in the Middle East.
"The forum, a grouping of financial regulators, finance ministriesand central banks, was created last year by policy makers fromthe Group of Seven leading industrialised nations to prevent arepeat of the Asian and Russian financial crises.
"It put Hong Kong, Luxembourg, Singapore and Switzerlandin the top group. It also said Jersey, Guernsey, Isle of Man andDublin, Ireland's "offshore" centre, were up to thesame standard. Bermuda, Gibraltar, Macau, Malta and Monaco werein group two, needing remedial action to bring them up to standard.
"Andrew Crockett, forum chairman, said the classificationwould help the International Monetary Fund prioritise its workin agreeing remedial measures to bring group two and three OFCsup to standard.
"OFCs are not in themselves bad, but if (OFCs are) not preparedto maintain adequate supervisory structures they could pose athreat to global stability," he said.
"The forum has warned that jurisdictions that fail to reachacceptable standards could face sanctions. In extreme cases, companiesbased in them would be unable to do business with those in mainstreamfinancial centres.
"The forum's list is part of an international crackdown onoffshore centres by the big economies that are worried about theloss of tax revenues, money-laundering and financial destabilisation.
"The Organisation for Economic Co-operation and Development,the club of 29 industrialised nations, will next month publishthe centres it believes fall short in transparency and co-operationon tax evasion.
"Some advisers were surprised at the inclusion of the Bahamas,[Cayman Islands] and British Virgin Islands, in the forum's groupthree. A tax expert said he was especially surprised by the lowstatus of the Caymans, which has made efforts to comply with OECDconcerns.
Editor's Note:
A quarter century ago, a grand old Caymanian sea captain -Capt. Aston Rutty, while contributing to a debate in the Houseof Assembly, said with conviction - that the Cayman Islands couldrule the world. This has not come about (some say not yet). Meanwhile,grudgingly, the world is now wanting this country to live by theirrules.
Perhaps, indeed these Blessed islands, while being looked uponby others as revolutionists in terms of economic prudence, racialharmony and purveyors of good order, have attracted the wrathof the world's tax collectors. They also believe that our MotherEngland could force us to comply with the tax compliances of theircountries.
Maybe, just maybe ... this territory may just have to weigh itsoptions in the coming months ... years and decide to do as Mamasays ... or move out.