Law fundamentally “flawed”
(CNS): A twelve page memo to government from the Financial Services Legislative Committee reveals that because the necessary experts were notconsulted before government passed the Dormant Accounts Law 2010 it has potentially dangerous consequences for the financial services industry. The legislative sub-committee, which was asked to review the bill — a month after its passage into law — said that unless it was changed it would have “a serious and irreversible adverse impact" on what was revealed to be a long list of key financial service industries, from investment funds to private wealth management services. The committee has now submitted a complete re-write of the law, which they say could still enable government to access truly, dormant accounts without damaging the financial sector.
“It is our view that the law as currently drafted is fundamentally flawed, unworkable and would cause irreparable damage to certain investment fund and capital market transactions,” the legislative committee said in the memo about the law, which was enacted this summer and is currently in place.
The financial experts warned that unless it was changed soon it had the “very real potential for current and future clients to elect to conduct their business in jurisdictions other than the Cayman Islands.”
The flawed law, which was passed in the Legislative Assembly in July, gives government legal access to dormant accounts after some six years of inactivity and was expected to raise as much as $10 milllion for the public purse.
Since its passage, however, concerns have been mounting about the implications of the legislation, for which it now appears there was little or no consultation with experts in the industry. Banks are already advertising details of hundreds of accounts that could be considered to be dormant under the law. The new legislation requires financial institutions to begin the process of turning over abandoned property to government otherwise those institutions could face criminal penalties.
Despite claims in the parliament by the premier that consultation had taken place on the law, it appears that the Financial Services Legislative Committee had not been involved in the drafting of the law and were not shown the legislation until after it was passed. The law was brought to the Legislative Assembly and passed without any public consultation as it was not given the 21 days reading period under Standing Orders because government voted to suspend that requirement.
Although the goal of the law was to enable government to seize abandoned cash and valuables, the subcommittee said it had swept up numerous other long term investment vehicles and instruments in the way it was drafted.
In the memo members of the subcommittee recommended that government change the law to apply only to bank licences where the assets are physically held in the Cayman Islands. The experts pointed out that, at present, the law could cause a “massive adverse reaction from Class B licensees if funds held in dormant accounts in the Cayman subsidiary or branch would be susceptible to payment over to the Cayman Islands Government.”
The law, as a result of “ambiguous drafting”, appears to catch a wide range of financial products that are not at all dormant, the memo said. The experts added that because terms were poorly defined in section 4 of the law the “scope is almost boundless”, and they warned of the real danger of scaring away clients from Cayman.
“It could cover any type of asset or property held by a financial institution … the logistics of monitoring such assets for the purposes of dormancy are inconceivable,” the memo states.
Among the many criticisms the subcommittee has of the law, it also notes that in most other jurisdictions the period of dormancy is around 15 years and recommend that the current six years in the law also be changed to 12 years. The memo further notes that the law in its present form is in conflict with the Bill of Rights, which will be enacted in 2012 and which government is now obligated to consider when passing all new legislation.
The experts also question why the law requires the publication of names and account details of dormant account holders. “This would be a great cause of consternation for most banks and trust companies involved in private wealth management and would be a deterrent to any clients of the licensees wanting to have their affairs managed through the Cayman Islands,” the memo revealed.
Although the subcommittee submitted its redraft of the legislation to the Ministry of Finance on 24 August, the government did not bring the changes to the LA during the most recent September sitting. It is still unclear if the government will bring the changes in the next meeting, expected to take place in November, or how much of the subcommittee’s redrafting the ministry will include in any future changes.
Category: Headline News
I just about spit my lunch up reading this. The government pockets dormant accounts? Unbelievable! No wonder the banking system is losing money. That and the new reporting laws.
The Dirty Little Secret is that the Banks have been scraping the dormant accounts into their pockets for years and listing it as profits!
If the rightful owner re-emerges to claim it, they’ll get it back but only after they pay a pile of administrative fees that whittle it down. It’s happened to someone I know.
So, for the money held in Banks, this simply transfers it over to the public purse where it can potentially be better used than in the pockets of greedy bankers.
What’s new? Surely another flawed law is no surprise. I work within the confines of at least one other seriously flawed law and it’s regulations and my stomach turns each time I have to impose the requirements thereof. I’ve truly wondered as to the qualification of those legal ‘drafts-people’ and how their amateur hour gets past the AG.
Things that make you go ‘hmmmmm??!!’
The "Emperor" has no clothes.
It would also be correct to say that the Emperor has no clue about anything that does not involve personal gain.
Stop the wrong people. It is one thing to do what someone says but another to draft bad law. That is contrary to the canons of being an attorney and the a-g should do better. Where was the CJ TOO. A PREDICTABLE TRAGEDY. The government relies on the legal advice og the AG
When you’re grabbing for cash
Dem laws you must dash
Through the LA at a pace
T’would make Sedonnie race
But when all’s said and done
They’re nothing but flash.
The worrying thing is that none of the Government MLA’s were remotely smart enough to realise how bad this law was they rushed it through. It reads like it was drafted as part of a high school law project.
Government MLAs were looking for ways of balancing the budget with best way if possible or orthodox ways if impossible. This now is haunting them.
How much more of this can we take ? who is actually at the wheel ? are they awake? this is another example of how govt tries to bully things into existance to suit their (and their cronies) greedy wishes.
Ohh I wonder if a certain Minister is reading what is happening to one of his close close supporters and unofficial advisors?
Again I say that The Chuckster rang the warning bell about McDinejad twice and very loudly !!!
The Chucksters bell is made of cast iron. It has neither sound or substance.
Chuckie is all noise about Chuckie and no substance.
Is this a little bit after the fact, surely some of these experts could have made their concerns known before the law was passed. I hope that they will now send their concerns and recommendations to all members of the LA, so that the law can be corrected post haste.
CNS: Second sentence: The legislative sub-committee, which was asked to review the bill – a month after its passage into law ….
Yes, CNS, but that states, " The legislative sub-committee"
This has been in the press for some time now. Does it take an invitation to speak up to them before the bill is passed? (not sure of how the process works)
Not sure why they asked ANYONE to review the bill AFTER it was passed…
Buffoons
The Premier tells the country that he consulted with the financial services industry and the new legislation is good. The financial services industry says they were not consulted and the new legislation could have "a serious and irreversible ADVERSE impact" on the financial services industry.
Someone is lying to the Caymanian people. I wonder who?
Are you really asking who?
He did consult, himself, as Chairman of the Finance Committee, Minister of Finances and any other titles he posseses, that being all the consultation he needs.
Can we ban him from coming back into Cayman, since he has absolutely no thought for what he is actually doing to this island?
Can we rush through the law for fingerprints, eyeballing etc. before he returns to Cayman?:)
McKeeva said in the LA that the industry had been consulted and was in full support of the law.
Just another misrepresentation and Cayman continues to forgive him or have we had enough now ???
Mac must go…..come on chant it…..Mac must go, Mac must go, Mac must go !!!
Everybody hush now. McKeewa most likely had his highest paid advisors drafting this law and there is only so much you can fit on the back of those little serviettes that they use in the first class section of an airplane. Not only that but the only time they had to write was between the times when they were carrying baggage. Nobody pay no mind to all those private sector folks in the finance industry pointing out the obvious flaws. Let them try and write laws under such trying conditions.
Dictatorship means never having to say you are sorry.
It’s not dictatorship, we call it premiership.
Dear Miss Sue,
Not sure who "we" is. I come from North Side too and one thing I have learned in my years is that if it talks like a dictator and acts like a dictator, then it is most likely a dictator.
I agree, fellow North Sider. I was trying to be sarcastic. Sorry I missed my mark!
What I am not clear on is if the politicians were actually within the borders of the country more often, would things be more screwed up or less?
I don’t think taking money from people’s accounts is the way to go!
That is like stealing!
I believe there are other creative ways to make money. We don’t have to be so desparate to want to take other people’s money.
THIS IS NOT THE "ETHICAL" CAYMAN I KNOW!
You all just shut up! Financial Services Legislative Committee shut up!
CG, who recently "gravitated" from law school, is in Monaco and he will re-write the laws when he comes back.
Unfortunately, this fiasco only confirms the perception that Cayman is run by a bunch of Beverley Hillbillies.
This perception, right or wrong, is a factor when companies and individuals analyse the risks of doing business in Cayman.
McKeeva wines and dines a lot of high powered people in extremely expensive venues.
This "fiasco" makes all of that expense and effort a complete waste of money. How can a knowledgable and sophiticated banking executive take this "Beverley Hillbilly" and his ill-concieved banking laws seriously?
However, there is hope. There are a number of young Caymanians in their 20’s and 30’s who, hopefully, will take over in a few years to replace the current generation of (perhaps well meaning but probably corrupt) incompetent "leaders" of this country.
How embarassing. I want to hear who has taken responsibility for this fiasco or been held accountable.
If I was a Cayman bank I would include a provision in the customer agreement stating that funds in an account that has been dormat for 5 years and 364 days would automatically vest in the bank
GOOD IDEA
So if the government is not listening to the experts in the field, who is it that they are listening to? Who drafted this law? Could McKeeva tell us that? Inquiring minds want to know.
What a surprise but with Madmac as the Minister of Finance this comes as no surprise. The whole matter is over $10m and then depositors can still claim back from the Government. It is just another stupid idea to alleviate the cash flow problem created by the variousgovernments over the years…. and by the way it is going to get worse. Madmac has not a clue.
One has to think that at SOME POINT the Attorney General was involved in the drafting of this law…This is absolutely scandalous, Mr. Bulgin….are you so indebted to Big Mac for your status that you will not even have the guts to tell him and his cronies that they are passing flawed legislation??
He writes it and has no clue if it’s flawed.
I think Mr. Bulgin’s resignation needs to becalled for. Not just because of this, but all the other things that make you wonder about his neutrality (hope I don’t have to spell them out – they’ve all been in the news).
Nice Micky Mouse porcess for passing bills!
Several associations in the financial industry told them of all these issues, but the law was passed anyway, so much for the consultation process!!!
This place is sinking, we lost 20% of the population and we will loose another 20%unless a miracle happens. Do you think that more protection is the solution for the small businesses?
And now some lawyers want to allow people outside Cayman to practice Cayman law (the legal firms would automatically transfer most of their jobs out as fund administrators have done) while some other lawyers (McField this morning in the radio) want to force firms to hire Caymanians and have 60% Caymanian ownership (haven’t we learned anything from the failed offshore centers that have done this?, do we really think that Cayman is so unique?)
Unless people understand that this quality of life is not sustainable without a growing international financial industry, that the size of the Government is unsustainable at 50,000 people, and we accept that we need more people here not less the direction is clear, trade accordingly, get another passport!
Lawyers outside of Cayman are already practising Cayman Islands law – look at the "onshore" offices of Maples, Walkers, Appleby, Solomon Harris, etc. where they have attorneys practising Cayman law that have never even visited the Islands, much less fulfill the current requirements to have 3 years previous experience…Some people have even made partner at these firms without ever practising here…As far as I know, the current proposed Legal Practitioner’s Bill (which has been stalled for, like, 4 years?) would require foreign attorneys practising Cayman law to have the same qualifications and pay the same fees thatpeople practising law in the Islands already do.
Well, if it is as you say it makes some sense, however if they are going to practice from abroad and don’t bring any of the other benefits to the economy that people living here bring they should pay double the legal and work permit fees.
What kind of businessman are you if you expect someone to pay permits and fees to a country that they are not residing in?
How would you like France to tax you for french kissing?
Law is different. You can’t practice California law without being qualified and authorized by the state of California (which means paying fees), regardless of where you practice. Same with all of the rest of the US, the UK, Canada, Australia, India. Why should Cayman allow attorneys that have never been to Cayman or hold comparable Cayman qualifications or don’t pay fees to be able to practice Cayman law?
I am not a lawyer, and I have never played a lawyer on TV, so I do not want to act like a politician and get into a diatribe on a subject about which I know very little, but I believe in each and every example that you have cited, there are "local" bar exams that have to be passed before you can practice law in that jurisdiction.
The Commonwealth countries may have some sort of reciprocal rights based on them all having their laws derived from "common" English Law, but I am fairly confident that in the US it is a two-part process; pass the California Bar Exams, and be in good standing, which presumably would include all fees payable being current.
In Cayman I believe being "called to the bar" (my favourite part of law) is a mere formality that occurs without any local test being administered. I could be wrong, but if Martin Polaine still reads this blog then perhaps he could let us know.
McField is a joke. If having 60% Caymanian ownership is such a great idea, why is his law firm tucked away in a little office in an industrial complex? If the big firms aren’t hiring good Caymanian lawyers, why has his firm not benefited from this and grown? If holding yourself out as practising in another country isso wrong, why does his window indicate he works in London?
Are you satisfied now that it has been confirmed that we have to KEEP A KEEN EYE ON THIS GOVERNMENT AND WATCH EVERY MOVE THEY MAKE?
Everybody is watching, but nothing changes, same old.
FIRE, READY AIM – again and again and again.
headline should be: GIG fundamentally flawed