Last year the United Kingdom government and the European Union requested centralized public registries that would disclose the true owners of shell companies and trusts. Since then the British Virgin Islands and Cayman Islands were asked to meet the requirement by November 2015.
Last Spring, the UK government wrote to the Cayman Islands and British Virgin Islands repeating its demand that they set up a central registry of private companies’ beneficial ownership.
Prime Minister David Cameron first presented the demand for an open registry to Britain’s Crown Dependencies and Overseas Territories in June 2013. It was softened by a promise that the UK and the G8 countries would do the same.
In a recent update on the Territory’s compliance to the United Kingdom’s request Premier Dr. the Hon. D. Orlando Smith informed members of the media on 15 September that the discussion surrounding the central registry request is still taking place.
“The discussion is ongoing between the Overseas Territories and the British Government,” the Premier said as he explained that the Territory’s position is that the information being stipulated is already available.
“The discussion is taking place between the industry, the BVI Government; and the United Kingdom Government. Many overseas territories are at different stages when it comes to the financial services sector, and for some overseas territories it is not really an important part of their economy. Others, for example Bermuda, already have a central registry,” Hon. Smith said.
On 16 July during another press meeting the BVI Leader announced: “The British Virgin Islands continues to have dialogue with the industry, and the United Kingdom on this matter; and we will continue to have these dialogues; so that we can arrive at some position before the November meeting.”
The Caribbean Council journal commented in a recent issue on the matter: “What is clear is that there is a dissonance between Britain’s desire to see its Overseas Territories comply with its norms, whether they relate to security, financial services or social issues, and the territories’ unusual and not well understood mix of God-fearing conservatism, self-confidence, and economic libertarianism. There is also a growing sense that the UK with its huge deficit, migration problems, and subsidiary relationship to the EU, now has fewer lessons to teach those who live in the successful and relatively wealthy remnants of Empire in the Caribbean.” “Speaking on his return home from London, the Cayman Islands Premier, Alden McLaughlin said: “unless such registers become the new global standard and are being used by all major players – including the UK – then neither we nor any other Overseas Territory or Crown Dependency intend to go first and have our economies experimented with and potentially damaged”. The journal further stated that “Overseas Territories worry most about their small size and limited resource base. They rely on tourism and financial services. Their economies are too small to diversify to absorb the fallout from major reductions in income from financial services.”
According to a recent Cayman Reporter commentary: “For now it appears that the Cayman Islands may have an option to take an alternate route than a public central registry for beneficial ownership. However we are not convinced that the UK government would implement such a registry and not have its OTs not do the same.
“In some way, fashion or form the UK may eventually get its desired outcome of the Cayman Islands implementing a public central registry. One possible avenue is pressure coming from the European Union (EU) through their Alternative Investment Fund Managers Directive (AIFMD) passport.
“The AIFMD is one of several measures drawn up by the European Commission to regulate financial services in the wake of the global financial crisis. The AIFMD aim is to establish a harmonised regulatory framework for monitoring and supervising the perceived risks posed by unregulated funds such as private equity and hedge funds. Rather than regulate the funds themselves, the Directive would target their fund managers.
“Attaining the AIFMD passport would allow non-EU jurisdictions such as the Cayman Islands to market Investment Funds registered in the jurisdiction to ‘professional investors’ across the EU.
“Whether the Cayman Islands receives the AIFMD passport will all depend on the European Securities and Markets Authority (ESMA) assessing the jurisdiction taking into account regulatory issues such as investor protection, competition, potential market disruption and the monitoring of systemic risk…… We will have to wait and see how this all unfolds in November at the Overseas Territories Joint Ministerial Council and when the ESMA conducts its assessment of the Cayman Islands for the AIFMD passport.”