The GAO probe centered on Ugland House, home to a legal firm in the Cayman Islands that has nearly 19,000 registered companies, approximately half of which are American. The GAO's report on the matter, entitled: 'Cayman Islands: Business and Tax Advantages Attract US Persons and Enforcement Challenges Exist', was examined at a Senate Finance Committee hearing on Thursday.

Commenting in the wake of the hearing, Tibbetts explained that:

"As many of you know, the Cayman Islands Government has been in dialogue with the GAO since August of 2007, regarding a review that the GAO was asked to undertake by the US Senate Finance Committee of aspects of the Cayman Islands' financial services sector relative to the US-source business."

"The GAO is an independent, non-partisan agency that works for the US Congress (Senate and House of Representatives). Its work is done at the request of US Congressional committees or subcommittees or is mandated by US public laws or committee reports. The GAO also undertakes research under the authority of the US comptroller general."

"The GAO has no law enforcement or regulatory powers and therefore, no access to information at the level of detail afforded under the various international cooperation channels that exist between the Cayman Islands and the US."

He continued:

"In January 2008, following Cabinet approval and the granting of diplomatic clearance by the UK Foreign & Commonwealth Office, the GAO met in the Cayman Islands with representatives from the Cayman Islands Government during the week of 3 March 2008 in Grand Cayman."

"As we announced then, the itinerary for the GAO's visit to the Cayman Islands consisted of meetings with senior representatives from the Portfolio of Finance & Economics, Cayman Islands Monetary Authority, Financial Reporting Authority, Tax Information Authority, the General Registry and the Portfolio of Legal Affairs. The GAO also met with Maples & Calder, the tenant of Ugland House, a building that has been referenced in US congressional debates on US tax issues."

"The GAO received comprehensive technical briefings and background on the Cayman Islands legal and regulatory framework as it relates to the operation of the financial services industry. The GAO team also had parallel in-depth briefings from Maples & Calder on matters directly concerning the firm and towards giving the GAO an understanding of the commercial aspects of the Cayman Islands financial services sector."

And went on to state that:

"We believe that the report generally presents an accurate description of the Cayman Islands' legal and regulatory regime and also assists in clarifying the nature of activity that takes place in the Cayman Islands in its role as a global financial services centre, to the benefit of both US and non-US persons."

"In several respects, we believe the report recognises the stature and strength of the Cayman Islands' financial services industry. As such, the Cayman Islands Government welcomes and appreciates the recognition of the institutional base and regulatory compliance of our financial services sector, as reported by the GAO team of investigators. Given the government's focus on stability, quality and integrity of our financial services sector, we were particularly pleased to see the report's reference to Cayman as a business-friendly, stable and internationally-compliant jurisdiction and that these reasons are key drivers for U.S. and global business."

"In addition, we believe the various statements within the report by US officials from the law enforcement, regulatory and tax areas citing a high degree of transparency and assistance from Cayman Islands authorities is a validation of the quality of our international cooperation regime. And lest this point be misunderstood: the fact is that no jurisdiction can claim credibly to have 100% eliminated criminal activity. It therefore becomes equally if not more important as to what you can do when you find it - hence the premium we have put on developing the effective international cooperation channels that the GAO found when they examined Cayman."

In conclusion, Mr Tibbetts observed that:

"The report also recognizes that tax compliance in relation to US persons is an obligation of those persons and that tax enforcement challenges in cross-border situations apply whatever the jurisdiction involved, and are not specific to the Cayman Islands."

"Another key finding in the report which again reiterates our position is that registered office services provided by Cayman Islands' firms accord with the general nature of such services and, in fact, are subject to regulation not applicable to such services under the governing US state laws."

"Our cooperation with the GAO in this process is an example of the approach of constructive engagement that we take in cross-border financial services matters. We recognize that it is no longer sufficient in this day and age to do the right thing - you have to prove that you are doing so as well."

"The Cayman Islands Government looks forward to continuing to assist various U.S. agencies in dealing with enforcement challenges referenced in the report, where we are in a position to do so. As the report recognises, however, the US Congress and those who are responsible for drafting and enforcing US tax laws and regulations necessarily must play the principal role in enhancing compliance with those laws and regulations by US taxpayers."