Thursday, April 7, 2016


Today, in a detailed position paper, Cayman Finance, which generally speaks for the financial service industry of the Cayman Islands, went to great lengths to show that Cayman is not a secrecy jurisdiction, spelling out, in chapter & verse, how many ways Cayman maintains the standards consistent with the OECD, and the other major developed countries. Treaties and international agreements were listed in great detail, by Jude Scott, Cayman Finance CEO. This is all true; the Cayman Islands do follow international standards.

I beg to differ with Mr. Scott, not in the laws in effect, but in the reality on the ground; while the Cayman Islands may have signed all the appropriate agreements that demonstrate transparency, and comply with the financial standards of the developed world, its financial services professionals practice opacity, rather than transparency. They do this by routinely, and consistently, employing a method of operation which will guarantee that any inquiry into beneficial ownership will absolutely fail to succeed.

The technique has no established name; I will label it the BVI/Cayman Sandwich. Cayman financial professionals, regularly and constantly, form British Virgin Islands companies for their clients, the BVI company is then used to open Cayman bank accounts. What's wrong with this picture ?

Allow me to list the reason why such an arrangement is by no means transparent:

(1) BVI companies have bearer shares, which means that there are no written records of the names and residence addresses of shareholders, on the certificates of shares of stock. Whosoever holds the shares in his hands, owns the company, and all its assets, including bank accounts, wherever located. That's the reason tens of thousands of Mainland Chinese own BVI corporations; you cannot know who owns what with any degree of accuracy, as ownership transfer is unrecorded, and can occur multiple times.

(2) While technically BVI regulations require the financial services professionals to hold the names of the shareholders, and hold the stock as custodians, there is a loophole large enough to drive a truch through. A third party, known to be trusted and AML/ CFT qualified, can hold that information, relieving the BVI firm of that responsibility. Unfortunately, there are no specific qualifications required of this third party. What if it is a tiny firm, located on Pitcairn Island, or some other remote location, which conveniently cannot be reached by any form of subpoena or demand for information ?

(3) The method, which I have identified was common to the accounts of two of the victims in the Cayman Gang of Four scandal, one a retired lawyer, the other a retired accountant, worked like this: the clients were assigned a BVI corporation; directors were located in another country; bank account in a third country; this is the Modus Operandi of Cayman financial service professionals.

Therefore, nobody can be reached to identify the beneficial owner of the corporation that owns and controls the Cayman bank account. Yes, the Cayman Islands is not a secrecy jurisdiction, but the tactics of its financial service community imposes secrecy through trickery, subterfuge, sharp practice, and abuse, by domiciling the client's company in a secrecy territory.

Yes, the Cayman Islands have all the laws and regulations of a responsible international financial center, but the islands financial professionals pervert the system, using the time-tested BVI-Cayman Sandwich. Until that scheme is outlawed, opacity will continue to rule in Cayman.


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