Cayman Islands Compliance and Transparency

The Cayman Islands has signed a TIEA with some 36 countries (of which 32 are currently in force) which provide for the exchange of information on a request relating to a specific criminal or civil tax investigation or civil tax matters under investigation. The Cayman Islands also has an intergovernmental agreement with each of the US and the UK (as detailed below).

The Cayman Islands has entered into two intergovernmental agreements to improve international tax compliance and the exchange of information - one with the United States (“US FATCA”) and one with the United Kingdom (“UK FATCA”). The Cayman Islands has also, along with over 99 other countries, committed to implement the OECD Standard for Automatic Exchange of Financial Account Information – Common Reporting Standard (the “CRS”) The Cayman Islands has issued regulations to give effect to US FATCA, UK FATCA and the CRS (together the “AEOI Regulations”).

All Cayman Islands “Financial Institutions” are required to comply with the registration, due diligence and reporting requirements of the AEOI Regulations, except to the extent that they can rely on an exemption that allows them to become a “Non-Reporting Financial Institution” (as defined in the relevant AEOI Regulations) with respect to one or more of the AEOI regimes. The AEOI Regulations require Financial Institutions to, amongst other things (i) register with the US IRS to obtain a Global Intermediary Identification Number (in the context of US FATCA only), (ii) register with the Cayman Islands Tax Information Authority (“TIA”), and thereby notify the TIA of its status as a “Reporting Financial Institution”; (iii) conduct due diligence on its accounts to identify whether any such accounts are considered “Reportable Accounts”, and (iv) report information on such Reportable Accounts to the TIA. The TIA will transmit the information reported to it to the overseas fiscal authority relevant to a reportable account (i.e. the IRS in the case of a US Reportable Account, HMRC in the case of a UK Reportable Account, etc.) annually on an automatic basis.

The Cayman Islands is undergoing assessment by the European Securities and Markets Authority, which it hopes will lead to its approval for the pan-European marketing passport. The Mutual Funds Act and the Securities Investment Business Act have already been amended to establish an opt-in regime for regulating Cayman Islands-domiciled investment funds and managers with connections to the European Union (EU), in order to facilitate extending the EU’s AIFMD passport to the Cayman Islands.

The Cayman Islands is a member of the Caribbean Financial Action Task Force which is leading the implementation of anti-money laundering and counter-terrorist financing measures such as obtaining and storing beneficial ownership information.

The Cayman Islands is a member of the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes, which is the premier international body for ensuring the implementation of the internationally agreed standards of transparency and exchange of information in the tax area.

The Cayman Islands has recently entered into an agreement with the UK that would enable UK governmental agencies to have a platform to gain access to beneficial ownership information of companies incorporated in the Cayman Islands but which is not accessible to the general public (thus maintaining a balance between the legitimate expectations of privacy in bona fide business dealings and the jurisdiction’s well-stated commitment to working alongside the international community in the global fight against money laundering, tax evasion, terrorist-financing and other criminal activity which is aided by the illicit movement of funds and hiding of assets around the world).