Tim Ridley Former CIMA Chairman

 

By Tad Stoner
tad@caymannetnews.com

Local financial experts have refocused lobbying efforts on US policymakers after last week’s G-20 summit, launching efforts to escape the global “greylist” of countries insufficiently compliant with international tax standards.

Anthony Travers, Chairman of the Cayman Islands Stock Exchange and head of a local lobbying group formed by the Cayman Islands Financial Services Association (CIFSA) to counter pressure for sanctions by overseas regulators, declined to offer details of the group’s effort, but said it focused on Washington contacts.

“CIFSA has already launched a major initiative and visited Washington with a view to evaluating the position and has implemented a programme that will correct a number of commonly held misconceptions about the role Cayman actually plays in the financial architecture that have regrettably been allowed to gain traction,” he told Cayman Net News.

He did not, however, explain why the task force had not scheduled talks with the Paris-based Organisation of Economic Cooperation and Development (OECD), the originator of the greylist, its partner blacklist and whitelist, and the group most critical to the Cayman Islands’ classification.

Tim Ridley, financial analyst and former Chairman of the Cayman Islands Monetary Authority, said, however, that the political imperatives and lingering resentment of the Cayman Islands within the OECD and among dominant members made it difficult to know what would prove most effective for Cayman.

“Given the swirling fog and lack of transparency in the process – ironical given that lack of transparency in Cayman is one of the complaints against us – it is very hard to work out what the next step will be to move Cayman up the list,” Mr Ridley told Cayman Net News.

“Experience tells us that getting off a list usually takes time, and the bar gets continually raised to lever more out of Cayman as it nears the desired goal,” he said, referring to growing local suspicions that obstacles to Cayman’s accession to the whitelist may prove greater than a re-evaluation by an OECD technical committee.

Mr Ridley, however, said Cayman Islands had no choice but to await results of that re-examination, while weighing long-term measures locally in an effort to counter what he earlier called a “traditional knee-jerk culture of secrecy”.

“I think we may have to wait and see the report of the OECD technical committee. But for the longer term, I urge Cayman immediately to focus on its domestic regime and improve the transparency of the private sector,” he said.

Prior to the G-20 summit last week, Mr Ridley said such local legislation as the Freedom of Information Law, the Office of the Complaints Commissioner and a proposed Anti-Corruption Law and Commission were necessary.

On Tuesday, underlining his call for a profound re-ordering of the financial-services industry, Mr Ridley recommended scrutiny of further legislation, saying transparency also meant “looking at the Confidential Relationships (Preservation) Law, various regulatory laws, the Companies Law, the various partnership laws and the Trusts Law to see what greater disclosure is warranted.”

“Legitimate” privacy must be protected, he said, but warned “Cayman also needs to increase its white-collar enforcement actions against those who break the law.”

Both Mr Travers’ and Mr Ridley’s remarks come against the backdrop of last week’s London summit of the G-20, comprising 19 of the world’s top 25 developed nations and the European Union. The group met to discuss the slowing global economy and, under increasing political pressure from US and UK electorates, possible sanctions against “tax havens”, accused of allowing multi-nationals to avoid millions of dollars in taxes.

Despite a flurry of intense activity by the Cayman Islands in the two weeks prior to the 2 April summit, the G-20 recognised the OECD’s inclusion of the Cayman Islands on its 30-member intermediate “greylist”, judging it to have committed to – but not substantially implemented – international tax standards

While Cayman has 20 tax information exchange agreements, the OECD recognises only eight – the highest number of any greylisted country – because it is still scrutinising the Cayman Islands’ so-called “unilateral mechanism”, which extends tax-information agreements to nations without first convening bilateral negotiations.

Mr Travers insisted, however, that task-force talks with Washington were best, appearing to leave Paris talks to government officials.

“There are a number of different aspects to the programme,” he said. “No doubt [the Cayman Islands government], in partnership with CIFSA, is continuing to work through the process for recognition of the unilateral mechanism,” he said, relying on official assurances of pending OECD approval.

“There should be an indication on that point within a few weeks. However, the general level of understanding about the importance of Cayman to the United States is not as good as it ought to be amongst US policy- and lawmakers and we are focusing on that aspect,” he said.

Both Mr Travers and Mr Ridley downplayed the importance of the greylist, saying Cayman’s relegation was politically motivated, but that both escaping and gaining the whitelist were equally fraught.

“It is too early to say what the effect of remaining on the greylist will be,” Mr Ridley said. “I suspect the OECD has not decided yet and it will probably be a moving target.”

He said the organisation would likely set a timetable for countries on the list and, while awaiting a response, “will consider what the recommended sanctions will be for those who continue to fall short.”

“Historically,” Mr Ridley said, “the threat of sanctions against tax havens has been sufficient to get progress. The actual imposition of global sanctions has never actually happened and is not something the OECD itself can do.”