Cayman Islands to Start Snitching

Posted by - Monday, January 21st, 2013

The Cayman Islands are about to provide a lot more disclosure on companies and hedge funds located there.

The Cayman Islands Monetary Authority, or CIMA, is opening up the offshore territory's funds to scrutiny after repeated criticism of secretive financial activity stained the tax haven's reputation.

Known for its lack of disclosure, the Islands garnered attention in the U.S. presidential election with questions surrounding Mitt Romney's tax rate.

Its reputation took another blow when it was revealed that major social networking company Facebook hid almost $700 million in a sister company to Facebook Ireland, which put the funds in offshore accounts on the Cayman Islands.

The move was an effort to avoid high taxes in Britain and other overseas nations, the Telegraph reports.

Politicians in both the U.S. and Europe have criticized the secret nature of the Cayman Islands' financial activity, but it was calls from hedge fund investors that really led to the change in disclosure.

From CNBC:

“We have been screaming for more transparency for some time now,” said Vincent Vandenbroucke, head of operational due diligence at Hermes BPK, which makes hedge fund investments on behalf of some of the UK's biggest pension funds. “It's no longer acceptable for [offshore] directors to act as rubber stamps.”

It's a growing problem for hedge fund investors involved in funds in the territory. Because of the low disclosure policy, it's difficult or nearly impossible for many investors to obtain information, such as details on the funds' directors, in the funds in which they invest.

And it's possible that the same directors were on the boards of hundreds of funds, as revealed in a Financial Times article several years ago.

CIMA noted that a number of central banks have updated their codes following the financial crisis. Now it plans to do the same, creating a public database of funds and companies located in the territory and listing the directors.

The plans are still being worked out, but CIMA's consultation will end in March this year. By then, a more open disclosure policy will likely be detailed, and the Cayman Islands will no longer be a safe haven for clandestine financial activity.


More like this...

4 Dividend Stocks for the Biggest Scarcity Trend of the Future
This commodity may soon become more precious than gold or oil...

Global Elite Hiding $18 Trillion in Offshore Accounts
When it comes to offshore banking, Mitt Romney is small potatoes...

How the Super Rich Avoid Taxes
Most Americans can't funnel money through offshore tax havens. they just automatically have their paychecks shredded and then try to live on whatever is left over...

Silver Pandas