As published on caymannewsservice.com, Wednesday 14 October, 2020.
(CNS): The financial services community is raising concerns that continuing changes to laws governing the sector are making Cayman less competitive. Industry experts are also accusing government of “a charade” and not fully engaging with them about the impact. Government has recently released a swathe of bills aimed at increasing oversight of records held by service providers on their clients, which the industry says go to far.
The ministry’s Department of Financial Services has circulated at least eight bills for consultation among industry stakeholders. But correspondence between members of industry associations shows that there is an emerging consensus that government is only listening to a small number of dominant players while ignoring the detrimental impact on the wider sector.
While industry members remain uncomfortable going on record about their concerns, Johann Moxam, Partner at Lainston International Management, a corporate service firm, has broken the silence and called out public misconception that the laws passed in relation to the financial sector are supported by the majority of stakeholders.
“The concept of the private sector consultation process is extremely limited to a handful of stakeholders that help drive financial sector initiatives,” Moxam told CNS in response to inquiries about the circulation of the proposed legislation.
“They can be described as not being Cayman-focused as they are part of global brands in law and accounting, operating in clusters and with offices and resources around the world. This is done deliberately as the system is designed to operate on a quid pro quo basis with the political directorate and large operators in industry,” he said, as he accused government of placing potential political donations above proper consultation.
“What is the point of seeking private sector input and suggestions from industry associations if those concerns, suggestions and alternatives do not make it into the final product, including the relevant bills, guidance notes and regulations?” he asked, as he described the government’s consultation as “a charade” and “a tick the box exercise”.
He said this allows the political directorate to claim they consulted the industry but fails to address the major issues at stake.
“They really only concern themselves with certain players looking out for their specific interests,” Moxam alleged. “Cayman is currently off the EU Blacklist, yet legislation is being drafted and they are seeking to pass laws that will continue to place our sector at a competitive disadvantage, making it more expensive and cumbersome to do business in comparison to our competitors.”
Moxam believes the Cayman Islands needs to be open for business and not capitulating to and helping external agencies to decrease the size and value of the jurisdiction’s financial services industry.
The latest swathe of changes to at least eight laws focus on the need for corporate service providers to keep accounts for their offshore clients. Financial service firms, banks, lawyers and other relevant providers would need to submit an annual return in the form of a declaration to the Registrar of Companies at the start of each year stating whether or not they are keeping proper books for the companies and other entities registered at their offices.
While it appears the amendments are motivated by international pressure for the Cayman Islands to comply with ever-tighter demands relating to transparency and oversight, some off-shore experts are questioning the wisdom of this step, given that Cayman has been removed from the EU list and is meeting all current regulatory standards.
Speaking in the Legislative Assembly on Wednesday, Financial Services Minister Tara Rivers said that her ministry continues to offer significant support to the financial sector, and in the face of COVID-19 has gone above and beyond to help keep business moving. She said the government engages extensively with the sector and has continued with a broad and successful consultation process regarding new legislation even throughout the pandemic.