Beneficial ownership: Government says US must sign first

The Cayman Islands will not adopt a mechanism for the exchange of beneficial ownership data that is not implemented by the United States.

Speaking at a press conference on Tuesday, Premier Alden McLaughlin called for a level playing field in terms of financial transparency and stated that a standard without U.S. participation “is not a global standard.”

The premier confirmed that government’s position on beneficial ownership had not changed after the Anti-Corruption Summit in the U.K. last week.

Cayman’s participation in the summit was predicated on it joining an initiative for the automatic exchange of beneficial ownership data. This initiative of 40 countries aims to develop a global standard for the automatic exchange of beneficial ownership data between law enforcement agencies and tax authorities of the partner countries.

Premier McLaughlin said government fully supports access to beneficial ownership data by foreign law enforcement agencies to help detect and prosecute corruption, tax evasion and other serious crimes. However, Cayman has not agreed to a specific method of exchanging this information.

For the record, Cayman has not agreed to implement a mechanism [to exchange beneficial ownership data]. Indeed, there is no mechanism to implement. It does not yet exist,” the premier said.

“What we have agreed to is to participate in the global discussion that will lead to the development of such a mechanism.”

This was confirmed in a letter to U.K. Chancellor of the Exchequer George Osborne days before the conference.

The letter, dated May 6, by Minister for Financial Services Wayne Panton, included several caveats for Cayman’s participation in the initiative.

“Once this standard is agreed and adopted by all Overseas Territories, Crown Dependencies, G-20 and OECD member states, we will participate in its global implementation,” the minister wrote.

“[Along] with reciprocity, the standard must ensure the full confidentiality and security of the data exchanged, and be subject to appropriate legal gateways.”

On this basis, Cayman is prepared to join the initiative for the automatic exchange of beneficial ownership data, the letter stated.

“We make this commitment to the initiative while recognizing its iterative nature, and we reserve our position on the interlinking of registers until the discussion of the point becomes clearer.”

While Cayman had not been asked to implement any standards, the premier said, it has gained for the first time “a seat at the table to develop the mechanism itself.”

Cayman had to fight to get an invitation to the summit, Mr. McLaughlin noted, and “had we not hustled in that way,” the discussion would have been led to the detriment of Cayman without its participation.

During the summit, government extended an offer to grant countries participating in the conference the same type of access to its beneficial ownership data that it has negotiated with the U.K.

From June 2017, U.K. authorities will have expedited access to information on who truly owns Cayman-registered companies and other entities, through a centralized platform which has not yet been developed, at the Department for International Tax Cooperation. However, the data is exchanged only on the basis of individual requests rather than the wholesale automatic exchange of all beneficial ownership data that the global standard aims for.

Cayman is pursuing both standards, the premier said, because it is committed to transparency.

In this spirit, Cayman will replace its Confidential Relationships (Preservation) Law, which often has been characterized as a “secrecy law,” with a Confidential Information Disclosure Law. In addition, government has passed legislation completely abolishing the use of bearer shares, which could be used to conceal the beneficial owner of an entity. Bearer shares had already been immobilized since 2000.

“Before someone says that we go too far with information sharing, we are also preparing a new Data Protection Law,” the premier said. The law would clarify and safeguard legitimate privacy rights.

The anti-corruption conference has passed the responsibility for the development of the global beneficial ownership standard on to the Financial Action Task Force and the Organization for Economic Cooperation and Development.

This hand-off to the international standard setters is precisely what is needed, said Minister Panton, adding that Cayman is comfortable with and has had a lot of experience in dealing with both organizations.

“We know the people involved and they understand our position,” the minister said. “I would foresee that we will continue that track record of engagement to influence the direction of a new standard.”

However, government expects the development of a global standard to take years. Mr. McLaughlin believes that initially the U.K. referendum on its membership in the European Union will create “a lull” surrounding the issue.

Even when implemented, it is far from certain that all OECD and G-20 countries are going to adopt it. Most notably, the United States, although represented at the event through Secretary of State John Kerry, was not in a position to even sign the summit communique, which outlined the steps to be taken to combat corruption agreed by the conference participants.

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