While clearly there is much to be said about the Cayman Islands as a holiday destination and the beauty of the islands and its beaches, as well as the rich history, there is more. In addition to all these wonderful features, the Cayman Islands is an offshore tax haven for many individuals from all over the world. The starting point of this is to recognize that the Cayman Islands government imposes no taxes. Considered to be the largest offshore banking center in the world, it not only holds deposits in excess of US$1 trillion but is also the second largest captive insurance base as well. Linked to this, the trust sector on the Cayman Islands manages more than US$500 billion in assets and the islands also have a Stock Exchange that has allowed it to be involved in mutual funds as well.
The Cayman Islands has also worked to ensure compliance with international regulatory requirements for the purposes of ensuring that its financial sector remains untainted. These include the obligation to declare possible criminally acquired holdings as well as to support investigations into assets, money laundering and holdings that may not have been legally obtained. The Cayman Islands endeavor to do this while at the same time maintaining a high level of client confidentiality and privacy and therefore providing a balance between the two.
Banking Laws on the Cayman Islands
Banking legislation on the Cayman Islands classifies banks into specific categories and this defines the scope of banking that can be done. This allows the government to be assured of the quality of services provided. In addition, there is continuing supervision provided by the Monetary Authority. This includes requirements of approvals for different classes or types of financial transactions and compliance with both local and international regulations.
The key strength of the offshore banking in Cayman Islands is the fact that there are high levels of confidentiality practiced. This is manifest in legislation that includes the Confidential Relationships (Preservation) Law 1995 as well as the Banks and Trust Companies Law 1995. These different pieces of legislation ensure that as a general rule, there can be no disclosure of confidential information about any bank accounts on the Cayman Islands unless it is in direct enforcement of local or international law.
Cayman Island Trust Law
Based on the Trust Law 1967, there are a series of legislation related to this area. Primarily these legislation allow for the import and export of trusts, and excludes forced inheritances as well as foreign judgments. In addition, the laws are clear about protecting the trust property against creditors as well as tax-free protection of the trusts for up to 50 years.
For organizations interested in setting up a trust company on the Cayman Islands, there are strict regulatory requirements to be complied with. These include that the minimum net worth of the organization applying for a Trust Licence should be US$400,000 and there must be a head office located off the Cayman Islands for international companies. In addition, the Cayman Islands government imposes requirements in relation to the personnel that are qualified to conduct such business and requires the submission of annual audited accounts for the purposes of licence renewal.
Insurance Law on the Cayman Islands
Regulated by the Cayman Islands Monetary Authority, there are a variety of different insurance licences available. In order to set up an insurance structure on the Cayman Islands, it will be necessary to make a submission to the Monetary Authority and to obtain approvals based on the specific classification.
The regulations in this area are detailed and directed at ensuring the highest levels of disclosure to the government. This then allows the government to review conduct by the insurers and to ensure that there is no fraud or unfair advantage taken.
Investment Fund Management on the Cayman Islands
Considered to be one of the foremost fund management centers in the world, the Cayman Islands has derived this reputation primarily due to the well crafted legislation and enforcement as well as the existence of a stable and reliable stock exchange. In addition, the use of trained, experienced and well reputed personnel in this industry ensures that the highest standards of care are imposed on fund management.
At the turn of the century, the Cayman Islands developed a reputation for being a choice destination to register hedge funds. This sector continues to boom, and many fund managers across the United States choose the Cayman Islands as the point of registration. With effect from mid-2011, there are approximately 9409 active mutual funds regulated by the Monetary Authority on the Cayman Islands.
Part of the enthusiasm for the development of this specific area on Cayman Islands arises by the fact that there are exemptions available when registering mutual funds. The system of exemption is regulated by Mutual Fund Law and no registration is required where the fund is listed on a recognized stock exchange, where it has not more than 15 investors who hold voting equity interests, where it is a closed-end fund and other specific categories.
Attitudes such as this clearly enhance the development of the more creative mutual funds and hedge funds that allow investors to development varied portfolios as well as stack the odds based on current market conditions. In addition, the fact that there are no taxes payable for the profits derived from this exercise make the Cayman Islands an appealing destination for such investments.
Conclusion
All in all, an examination of the options available in the context of financial protection and financial investment mean that there is huge opportunity for growth. The Cayman Islands has worked long and hard to acquire its reputation for providing solid support for investors on the islands and has developed an impeccable reputation in the industries mentioned. This is clearly enhanced by the stringent requirements that the Cayman Islands government imposes in terms of the quality of the work force as well as the requirements for compliance with the regulatory framework.
The Cayman Islands would be an ideal stop as an offshore tax haven as ultimately, in order to review your investments internationally, a quick trip to the Cayman Islands for business, and sun and sea and sand may be in order.