Members of the US Congress reportedly want to crack down on tax havens and it is usually the Cayman Islands that everyone first thinks of in this regard. This high profile certainly reflects the high degree of success we have enjoyed in this industry, but does that make us an easy target?

With their so-called “Stop Tax Haven Abuse Act” submitted in February, two Democratic and one Republican Senator want to label the Cayman Islands and 33 other territories or countries as ‘’offshore secrecy jurisdictions’’ where US citizens’ financial activity would be automatically suspect.

This latest article follows several published during the last few months in a similar vein.

Just recently, the Cayman Islands was accused of “shortchanging” the US, even as we profit from it, and the usual litany of Cayman-related mega-frauds from Enron through Parmalat was recited, along with the familiar allegations that this country is being used for US tax avoidance.

Meanwhile, as we have said over and over again, sooner or later, if the Cayman Islands continues to play host to billion-dollar frauds without taking any meaningful action, major jurisdictions, notably the US, are bound eventually to start complaining and will then take unilateral action against us.

The US financial regulatory Securities Exchange Commission (SEC) has also been taking a closer look at unregistered and unregulated hedge funds – such as the more than 80 per cent of the world’s 8000-plus hedge funds registered here.

For many years, both public and private sectors in the Cayman Islands have been promoting our “seal of approval” in the shape of what is claimed to be financial regulation and supervision that meets internationally accepted standards.  But, we have said it before, and we’ll say it again, we need to go beyond what is currently “accepted”.

Registration or licensing without vigorous policing, could backfire if naïve investors perceive it as a seal of approval.

When things go wrong – and they will go wrong – those international ‘standards’ will change in the blink of an eye, according to the economic interests of the most influential jurisdiction involved, amidst all sorts of recriminations over why the Cayman Islands was not doing more to impose higher standards.

We have warned on at least one earlier occasion that, at some point, the billions of dollars lost by investors and creditors in companies like Enron and Parmalat through questionable Cayman subsidiaries, coupled with the politically charged issue of even more billions of dollars of taxes being lost through Cayman companies, will reach critical mass and, like nuclear fission, the resulting explosion and fallout will be devastating indeed. Should this happen, it could take 10 years or more to recover.

With this possibility in mind, and drawing on the history of similar shakedowns in other jurisdictions, we should now be girding our financial industry’s respect, instead of compromising the integrity earned over the past 40 years.

Fatuous and self-serving talk about “bad eggs”, “it wasn’t our fault”, “negative perceptions” or “educating the foreign media” is never going to be an acceptable excuse or solution to the problem.

In our opinion the clock is ticking and efforts must immediately be started to disarm this unexploded bomb before it blows up in our faces.  Press releases, however well intentioned, are not going to cut it.  We may as well try to shelter behind a piece of paper when our metaphorical bomb explodes.

We need substantive and efficacious measures to be taken and everyone with a long-term interest in the economic survival of the Cayman Islands needs to get involved. Regrettably, however, the numbers of people with the long-term interests of the Cayman Islands at heart has been substantially reduced as a result of the rollover policy and the foreign elements in the private sector will, when push comes to shove, take their money and run, leaving everyone else wondering what happened.