The Cayman Islands branded a transparency drive backed by David Cameron as “pointless”, as it mounted a vigorous defence of offshore finance in the run-up to Thursday’s anti-corruption summit.
The overseas territory said it had asked to participate in the high-level summit at Lancaster House, which aims to agree practical steps to “expose corruption”, because it wanted to “add perspective” and address misunderstandings.
Wayne Panton, minister of financial services said the Cayman Islands already had a more effective approach to rooting out wrongdoing than the approach favoured by the prime minister, which requires companies to list their ultimate owners on a public register.
He said the UK’s decision to push public registers could be criticised as “weak policymaking” because it did not require the information on the register to be verified. “The small element of abusers of the international financial system . . . are the very people who are not going to be honest with voluntary disclosures.”
In an interview with the FT, he said the Cayman Islands had adhered to a higher standard for the past 15 years because it required company service providers to collect and verify the information. “The suggestion that going to a central public registry with unverified information is a better approach is frankly very disappointing.”
Mr Panton ruled out putting the verified information into the public domain, saying that business might move to “a jurisdiction that respects privacy more”.
“We believe there is a very clear distinction between secrecy and privacy,” he said.
The argument is likely to go down badly with campaigners who have urged Mr Cameron to “strike a decisive blow at the UK’s role in facilitating global corruption” by demanding full transparency from Britain’s offshore centres.
They say the leaks from a Panamanian law firm demonstrate the threat from secret shell companies, underpinning the need for public registers revealing their beneficial — underlying — owners.
David McNair from One, a lobby group, said: “The Panama Papers prove how overseas territories facilitate grand corruption. For the UK’s credibility, the anti-corruption summit must secure public beneficial ownership registers in these jurisdictions.”
Mr Cameron first called on the overseas territories and crown dependencies three years ago to “rip away the cloak of secrecy” by creating public registers. Last month he dropped the demand and praised the advances of the offshore centres saying the transparency they offered would be “far in advance of most other countries”.
Pressure from the UK has prompted Cayman to reduce its reliance on law firms from other jurisdictions to vet people registering companies. After a three months grace period, all relevant information will have to be held on the islands.
It is also repealing its “confidential relationship (preservation) law” after criticism from the Tax Justice Network, which said individuals risked jail for merely asking for information. Mr Panton rejected the criticism but said it was taking action “because of perception that it unfortunately created”.
Mr Panton said there had been a “disproportionate focus on the role of offshore”, which neglected the failure of onshore centres, particularly states such as Wyoming, Nevada and Delaware in the US, to meet international standards. He said: “I think the UK has a problem but it pales in comparison with the US problem.”
Mr Panton said a US crackdown announced last week was “not unhelpful” but argued that the US remained a weak link. The White House launched a set of measures to combat financial crime and close a loophole that allows foreigners to hide money using US shell companies. But the move swiftly came under fire from transparency campaigners who said the rule would allow criminals to list managers of shell companies as ‘beneficial owners’ of a company.
Jude Scott, chief executive of Cayman Finance said the islands provided an “efficient platform” for international investors from a number of jurisdictions who could pool their funds without being exposed to additional layers of tax. He said the Department for International Development used the Cayman Islands, in what he described as the best possible endorsement of its role.
Cayman received its invitation to the summit about a week ago. The British Virgin Islands said it had not been officially invited and time was running out for the premier to attend. Guernsey is also not attending because it had not been officially invited and it has just held a general election.