Special Report
Government welcomes KPMG'sobjectivity
The Government announced on Friday October27 that it welcomed the KPMG independent review of its financialregulatory system published the same day.
"The report is comprehensive and demonstrates that we arecommitted to maintaining a well-regulated financial services industry,an important endorsement for one of world's largest financialcentres, and this sets the record straight," Financial Secretary,Mr. George McCarthy is quoted as saying in a release issued bythe UK-based Foreign and Commonwealth Office (FCO).
"We do have areas that are recommended for further attention,and we will be giving these full consideration in consultationwith the Monetary Authority (CIMA) and the industry, " theminister said.
He said the mere idea that the Overseas Territories agreed tobe assessed against an explicit, comprehensive and, in some instances,super-compliant, set of standards is what sets this review apart.
Conceding that the review process was quite gruelling, Mr. McCarthysaid the Government nevertheless appreciates KPMG's rigour andlooks forward to mapping out with the industry and CIMA whateverword needs to be done.
The KPMG report on the Cayman Islands, the release says, is partof a set of reports on financial regulation in the Overseas Territories(Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Montserratand Turks and Caicos) commissioned by the UK and the Territories,arising from the UK White Paper, 'Partnership for Progress andProsperity'.
It analyses the position of each Overseas Territory individually,in terms of the extent and range of financial business conducted,as well as the strength and effectiveness of their regulatoryregimes.
It is 'exception-based' and, as a consequence, concentrates onthe areas of financial regulation where action is considered necessaryto comply fully with international standards and good practice.
The next steps involve engaging in local consultation to reachagreement on an implementation plan with regard to recommendationsmade in the report, prior to its submission in January 2001. Saidimplementation plan is also to be discussed with the UK government.
With regard to the three priority areas identified by the UK government,the release said. the Cayman Islands has either already addressedthem or is in the process of doing so.
The three areas at reference are: legislation for the establishmentof independent regulatory authorities; enhancements to laws andsystems to combat moneylaundering; and the introduction of legalpowers to allow regulators to obtain key information and to sharerelevant information with overseas regulators in order to assisttheir investigations.
Legislation already passed earlier this year by the Cayman Islands,and recognised in the KPMG report, improved regulatory accessto information and international regulatory cooperation, and madeenhancements to the money laundering legislation further to anFATF review based on the FATF 25 criteria introduced in February2000.
Work on the necessary legislation to establish the full independenceof the Cayman Islands Monetary Authority (CIMA), it is said, isalready underway and will complement the detailed planning undertakenby the body's Board of Directors and management over the pastseveral months.
The release says that the KPMG report made positive comments aboutsome of the areas they referred to as priority elements in thereview.
One such comment reads: "By the creation of CIMA in 1996,the Cayman Islands commenced a positive process of developinga structured and resourced regulatory function, and a visiblecommitment to achieving international standards and good practice."
Another was: "The Cayman Islands now has strong internationalcooperation arrangements and the recent changes to the MonetaryAuthority Law in particular demonstrate its commitment to internationalcooperation."
A third was: "The Cayman Islands has introduced a numberof significant legislative and regulatory provisions designedto bring it into compliance with international standards [in thearea of anti-money laundering], including modern 'all crimes'money laundering legislation. The legislation taken as a wholeis extensive and contains much of the material and covers mostof the issues that we would expect in a jurisdiction that is fullycompliant with international standards. We consider that thisis positive evidence of the Cayman Islands' commitment to preventmoney laundering."
The KPMG report also noted that a positive feature was the factthat unlike a number of other jurisdictions, the Cayman Islandstreats mutual fund administration, company management and theprovision of trust services as regulated activities.
As a result of the KPMG review, the release says, the OverseasTerritories are expected to be included in the second wave ofIMF/Financial Stability Forum reviews of financial regulation,due to commence in 2001, instead of in the first wave which commencesin November 2000.