Foot gets unexpected welcome

(CNS): The results of the UK Treasury’s review by Sir Michael Foot have been welcomed by one of the Cayman Islands’ most high profile law firms, which said it believes the results demonstrate how significant the jurisdiction is when it comes to the world financial markets. Maples & Calder said yesterday that, aside from the criticisms regarding the management of the economy, the rest of the report is very positive for the islands and should be welcomed by the financial industry. Foot’s review not only confirms Cayman’s commitment to international standards but also its importance to the UK economy.

Contrary to the claims by the industry body Cayman Finance, which said the report was “much ado about nothing”, the tenants of Ugland House, who have received considerable criticism from the US and in particular President Barack Obama, have said this balanced review should be broadly welcomed, not least because the report specifically highlights the role the Cayman Islands plays in the global financial markets as the world’s leading centre for hedge funds.

Senior Partner Charles Jennings said the review shows how significant fees are earned by management companies and other services providers based in the UK by providing services to international investors in these Cayman Islands funds. This helps provide UK-based jobs and supports taxable revenues in the UK.

“The report confirms how international authorities have reviewed and confirmed that the anti-money laundering laws and levels of regulation in the Cayman Islands meet international standards, and in the case of identifying beneficial ownership of companies exceeds the standards applied in certain G20 countries, such as the US,” Jennings said. “The report also explains the levels of booked bank deposits in Cayman Islands banks, an often misunderstood subject.”

The review explains that much of the money on deposit in banks here comes from US banks, which place overnight deposits with their Cayman Islands branches to enable them to pay interest on overnight deposits, subject to oversight by the US Federal Reserve who regulate these US banks.

“It also affirms that in addition to the tax information exchange agreements with many OECD member states, the Cayman Islands has adopted the EU Savings Directive and Cayman Islands banks already automatically report interest payments on accounts of EU residents to all EU member states,” Jennings added.

Above all, the report serves as an interesting counter to the most recent report from the Tax Justice Network, which ranks Cayman as the 4th most secret jurisdiction in the world, Jennings observed.

“This report convincinglyrefutes assertions made by the Tax Justice Network and others as to the flight of capital offshore by demonstrating that, in reality, both the United States and the United Kingdom are net recipients of funds from offshore financial centres, and not vice versa," he added.

Last week Cayman Finance said the report was not damaging and dismissed its contents and said Cayman needed take no action as a result of it.

Although Foot certainly raises concerns about the government’s economic management and the jurisdictions resilience to the world economic crisis, he acknowledges that Cayman is the only overseas territory to have enshrined borrowing limits in legislation and offers no other criticisms of Cayman and its offshore industry.