British Minister Praises Cayman Islands Regulation

Lisa Ugur, Tax-news.com, London

07 August 2000

Since the Financial Action Task Force (FATF) published its blacklist of money-laundering hotspots, and as a consequence the US issued advisories warning American financial institutions to be wary of transactions with a number of offshore jurisdictions, the Cayman Islands have been fighting to restore their reputation and are pressing ahead with change. Legislators are currently considering four bills aimed at dramatically curtailing the secrecy bound up in the territory's US$600 billion banking business and the Cayman Islands' efforts have not gone unnoticed. On a three-day visit to the Caymans last week, British Minister for Overseas Territories, Baroness Patricia Scotland, praised the territory's endeavours to clean up its financial industry but said tighter controls must take effect.

For a small territory tucked away in the Caribbean, the Cayman Islands is, perhaps astonishingly, the world's fifth largest banking centre with around 590 banks and trust companies. Nonetheless, it craves respectability and has been badly stung by accusations that it is a haven for so-called "dirty money", despite government protestations. The fact that the Cayman Islands avoided inclusion on the OECD's list of financial centres deemed to have "harmful tax practices" seems to be overshadowed by the accusations levelled by the FATF and the ensuing US advisories and the Cayman Islands do seem to be faced with an enormous task in convicing bodies such as the FATF that they do not invite money laundering.

However, ending her trip to the Caymans last week, Baroness Scotland said that she was "encouraged" by the steps taken by the financial industry in improving its regulation to meet international standards. Scotland, who originally is from Dominica, said the Cayman Islands financial sector "has done well" with regard the OECD initiative - the pledge by the Caymans to meet OECD standards within a three to five year period. She commented: 'I am encouraged by the enthusiasm with which the financial sector has addressed the issue to make sure the market is as clean, robust and well-regulated as it could be.'

Referring to the FATF money laundering charge and the advisory, she said: 'I have the clear impression the systems are already in place in accordance with good practice....gaps are being closed. I would hope that Cayman would be able to do enough to ensure the advisory could be lifted.'

Baroness Scotland visited the Cayman Islands after three days of talks in Washington with US Treasury officials about the advisories on money laundering issued by the the US Treasury against a number of British territories engaged in offshore finance.

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