21/07/21

CAYMAN ISLANDS: PACT delays opening overseas offices.

As published on caymancompass.com, Wednesday 21 July, 2021.

The PACT government is postponing plans that were put in place by the previous Progressives administration to open new overseas offices in the US, Europe and Asia and will retrain the staff newly hired for those offices to take on different roles.

In the 2021 budget, $2 million had been earmarked for the establishment of offices representing the Cayman Islands in Washington, DC; Hong Kong; and Brussels, Belgium.

Financial Services Minister André Ebanks told members of the Finance Committee on Monday that deployment of staff to Washington and Brussels would not begin until the last quarter of this year, with the Hong Kong office potentially being staffed in the first quarter of 2022.

Ebanks said these offices would have a much stronger focus on financial services rather than on investment promotion, which the previous government had championed. Promoting investment would be a secondary function, he said.

He added that, before the PACT government was sworn in, three representatives for North America, Asia and Europe, as well as two deputies for North America and Asia had been hired.

Therefore, the five staff members who were hired to run those offices shortly before the May general election would need to be retrained so they could “fully immerse themselves in the complex area of regulation and tax matters, and be able to speak to it clearly and advocate on behalf of our jurisdiction in these key areas”.

He added that his government felt it was prudent to ensure that those five Caymanians should undergo “rigorous training” on financial services, considering the anti-money laundering and tax-related issues Cayman is facing internationally.

Ebanks noted some of the challenges facing Cayman’s financial services industry, including the islands’ inclusion on the Financial Action Task Force’s grey list, which could lead to the addition of Cayman to high-risk lists in other jurisdictions. He stated that proposals from the OECD and G20 for a minimum global corporate tax rate were moving “at a much faster rate than at the time this proposal [for overseas offices] was initially pitched”.

He added that immigration, personal tax liability and health insurance details for those jurisdictions had not yet been worked out. “We would not, with the unfair reputation that we have around the world, deploy a Caymanian into a jurisdiction and not know their tax liability; that would be embarrassing to the country,” he said.

The staff will no longer work with the Ministry of Investment, Innovation and Social Development, but will be transferred to the Ministry of Financial Services, Ebanks said.

The $2 million budgeted for the establishment of the offices will not be needed in 2021 and will be forwarded to next year’s budget, he said.

Ebanks said that the purpose of the Brussels office would have been to engage with European Union officials, which he pointed out could be done from the already-established London office, as Brussels is a two-hour train journey from there, and those who intended to attend meetings in Brussels could travel from the UK as needed.

He added that meetings could also be conducted over video rather than in-person, as is now a common practice due to COVID restrictions. “I don’t think it’s a stretch for six months until we launch the offices to be able to engage with the EU properly,” he said.

Asked by former premier Alden McLaughlin if the PACT government was planning not to open a physical office in Brussels, Ebanks responded, “Potentially,” but said the government was looking at the “cost options” and how to resolve the immigration and tax status of employees.

But McLaughlin argued that his government had been acting on “very clear advice” that since the UK had left the European Union, the ability of Britain in matters relating to the EU is “greatly diminished”, thus it was necessary to have direct representation in Brussels, which would facilitate “good intelligence, good advice and good advocacy”.

Leader of the Opposition Roy McTaggart asked if all five newly-hired staff, one of whom he said had left the island in preparation for the overseas posting, were on the government payroll. Ebanks responded that they were, and added that any of those who had left Cayman may have to return to take part in training locally.

None of the new hires were identified during the meeting, but former Dart executive Chris Duggan was named last week as the new representative of the Washington office in a press release issued by the Royal Cayman Islands Police Service, where Duggan was the commandant of the Special Constabulary.

All the Opposition members present at the meeting objected to the reduction in funding for the overseas offices and voted against it, but it was passed with a majority vote by government members.