Up Front
Banks AssociationReply
In responseto a lead story in Cayman Net News last week, which was headlined:'Barclays Capitulates' -the President, Mr. Eric Crutchley on behalfof the Cayman Islands Bankers' Association (CIBA), has issueda
statement in response to questions raised by this publicationin connection with the recent action taken by Barclays, in thematter dealing with the accounts held by beneficiary owners atthat institution, which may now be subject to requirements ofthe USA Internal Revenue Code:
Questions posed by Cayman Net News wereas follows:
Are there any other Banks in the CaymanIslands, which have taken the steps Barclays has, as per theirrecent correspondence to their US Nationals account holders?
Will this be the General Policy of all thebanks which belong to the Cayman Islands Bankers' Association?
Could you say if there has been an increaseor drop in the issuance of Banking licenses in all categoriessince the enactment of legislation last year, which forces theCayman Islands Government to meet compliances dictated by theOECDs, FATF and other entities?
Will this type of reporting be across theboard for all Financial Services offered by Cayman Islands' Financialentities?
Has the Monetary Authority issued any directivesto the Banks in conjunction with guidelines for meeting the newcompliances? If this is the case, could you please tell us whatthese are?
Is it the intention of the Bankers' Associationto make any representation to Government in connection with theserequirements, which may hamper the growth of the Financial Industry?
Are the Banks, belonging to your Association,planning any type of public campaign setting out the Banks' positionin respect of these new compliances?
The following is the response from the CIBA:
"In response to a recent release headlined:'Barclays Capitulates', the Cayman Islands Bankers' Association(CIBA) has been asked to make comment. For clarification purposes,this is a reasonable request.
"It should, however, be stated at theoutset, that it is not the function of CIBA to comment upon theinternal policy of any of its members and it should be furthernoted that, where an organization is an international institution,any major policy decision would probably be directed from overseasand not generated locally. Further, that such policy would mostlikely be extended to other overseas operations and would notbe specific to this jurisdiction.
"In addressing the Financial ActionTask Force (FATF) issue which is an Anti Money Laundering one,it should be made clear that the reason why Cayman is on the FATF'slist is NOT because of the practice of financial institutions,but rather that there was not the specific legislation or regulationsin place to enforce what was already in practice.
"In addition to the front line banks,most of the offshore banks and trust companies operating in Caymanare subsidiaries of major international financial institutionsand, in keeping with the internal control standards mandated bytheir respective parent organizations, these local banks and trustcompanies have had systems requiring comprehensive due diligenceon new business for many years prior to the advent of the PCCL,the PCCL Regulations or the CIMA guidance notes.
"Seeking photo identification and addressverification from new customers together with other pertinentreference and business criteria is, therefore, not new. This hasbeen common practice throughout the financial industry for manyyears and, locally, banks and trust companies have been seekingand obtaining this information for several years. 'Know Your Customer'requirements are not new to Cayman and have been, in fact, verymuch a part of CIBA's Code of Conduct, which has been in existencefor 11 years (1990).
"The criteria have now been expandedand are well set out in the recently produced 'Guidance Noteson the Prevention and Detection of Money Laundering in the CaymanIslands' by the Cayman Islands Monetary Authority and these areexpected to be officially released shortly.
"Within these Guidance Notes and, inkeeping with international requirements which are directed atall FATF/OECD listed jurisdictions around the world, financialservices providers will be required to observe the 'Know YourCustomer' criteria in respect of existing, as well as new customers.
It is the existing business which is thefocus of this statement and the Guidance Notes require financialservices providers to review all business relationships existingprior to 1 September, 2000 (the date the Anti Money LaunderingRegulations came into force), to assess these by conducting thenecessary due diligence and to take appropriate action by seekingand obtaining necessary information.
"This requirement is one which willcause each institution to establish a policy as to how it reviewseach account it holds, but it will be the responsibility of eachfinancial services provider to undertake this review in the mostappropriate way it sees fit to achieve the review within the specifiedtime contained within the Guidance Notes", the statementconcludes.
Mr. Crutchley also stated when contactedlast week that, in spite of the existing scrutiny being conductedby the FATF and other adverse press publicity the country is receiving,there has been an overall positive gain in the activities of theFinancial sector at the end of last year. Among these were increasesin the registration of additional Class B Banks, Mutual Funds,Captive Insurance and Offshore Companies.
Meanwhile, however, it has been learnt thatthere has been an appreciable drop - as much as one third in theregistration of new companies in the first quarter of this yearof (2470) - when compared to same the period (3666)
last year.