Cayman's financial service industry has been thoroughly reviewed by various international bodies over the last few years. Indeed the US government has recently written a report about both Ugland House and Cayman: at the request of Congress its auditing agency, the United States Government Accountability Office ("GAO"), visited Cayman and spent time at Ugland House, where Maples and Calder had the opportunity to explain to them directly the nature of its business and the role of a registered office provider under Cayman law.

The GAO's report, dated July 2008, gave both Ugland House and Cayman a clean bill of health. It acknowledged that Cayman has a stable and internationally compliant legal and regulatory systems and that the Cayman government cooperates fully with US tax enforcement and other regulatory investigations.

The Cayman Islands is a signatory to the MCAA in Tax Matters and has implemented FATCA and the CRS, which provide for the automatic exchange of financial information to the US and CRS Participating Jurisdictions (which currently number more than 90, and include all EU countries). This is further described above. In addition, the Cayman Islands has signed a total of 39 bilateral TIEAs.

The countries with which Cayman has signed bilateral TIEAs are:

Argentina	Germany	New Zealand
Aruba	Greenland	Norway
Australia	Guernsey	Poland
Belgium	Iceland	Portugal
Brazil	India	Qatar
Canada	Ireland	Seychelles
China	Isle of Man	St. Maartin
Curacao	Italy	South Africa
Czech Republic	Japan	Sweden
Denmark	Malta	The Faroe Islands
Finland	Mexico	United Kingdom
France	Netherlands	United States

In 2005, the Cayman Islands implemented the Reporting of Savings Income Information (European Union) Law (2014 Revision) and regulations made under such law (the "Cayman EUSD Legislation"), whereby Cayman Islands banks must report information on bank accounts held by EU residents to the authorities. The Cayman EUSD Legislation is similar to the EU Savings Directive. Notwithstanding the repeal of the EU Savings Directive, the Cayman EUSD Legislation remains in force, however it is expected that it will also be repealed following the introduction of the CRS, which is discussed above.

Below is additional information on the Cayman Islands banking and financial markets, regulations to promote information disclosure and transparency and policies to prevent money laundering and other illicit uses of the financial infrastructure.


Regulation

• The Cayman Islands Monetary Authority ("CIMA") is the financial services regulator, responsible for prudential and anti-money laundering regulation of licensees and registrants.
  
  
• CIMA is a full member of the International Organisation Securities Commission ("IOSCO"), the Offshore Group of Banking Supervisors ("OGBS"), the Offshore Group of Insurance Supervisors ("OGIS") and the Offshore Group of Collective Investment Scheme Supervisors, as well as a member of the OECD's Level Playing Field sub-committee.
  
  
• CIMA adopts and applies the Basel Core principles (for banking), International Association of Insurance Supervisors ("IAIS") principles (for insurance), IOSCO principles (for securities and investment) and the Organisation for Economic Cooperation and Development ("OECD") principles for corporate governance. Cayman is a member of the Steering Group of the OECD Global Forum on Tax Transparency and Exchange of Information.
  
  
• In the latest review of the Cayman Islands conducted in 2009, the International Monetary Fund ("IMF") recognised that an "extensive program of legislative, rule and guideline development has introduced an increasingly effective system of regulation, both formalising earlier practices, and introducing enhanced procedures." (Source: CIMA website).The IMF is scheduled to conduct a review of the legislative and regulatory framework again in 2018. (Source: CIMA website)

Banking

• The Cayman Islands is recognised as one of the top 10 international financial centres in the world, with over 40 of the top 50 banks holding banking licences. As at September 2017, there were approximately 155 licensed banks, with approximately two thirds being international bank branches. Branches and subsidiaries are regulated by CIMA on the basis of consolidated supervision in connection with the onshore home regulator. (Source: CIMA website)
  
  
• Private banks number less than 20 and are required to establish a physical presence in the Cayman Islands, with a greater minimum net worth and capital adequacy ratio. (Source: CIMA website)
  
  
• For all banking licensees CIMA typically adopts more stringent capital adequacy requirements than proposed under the Basel Core principles.
  
  
• Reasons to establish a banking presence in the Cayman Islands include the provision of multi currency accounts (without exchange restrictions) with access to international markets, depositary sweep facilities and internal treasury functions, on a tax neutral basis.

Investment Funds

• The Cayman Islands is recognised globally as the leading jurisdiction for the domicile of investment funds.
  
  
• The Cayman Islands has well-established legislation and standards applicable to the fund industry, which is regularly amended to meet with industry and international regulatory standards.
  
  
• As at September 2017, there were approximately 10,630 investment funds registered with CIMA. Many fund administrators (approximately 100) are also licensed or registered with CIMA. (Source: CIMA website)
  
  
• 17,896 exempted limited partnerships are registered in the Cayman Islands, many of which were involved in major private equity funds formation and related transactions.

Cayman Islands Hedge Funds and Private Equity Funds

Ugland House is the registered office for many of the world's best hedge funds and private equity funds. There are many good, valid and legitimate reasons why the Cayman Islands is the domicile for the world's leading hedge funds and private equity funds:

• These funds allows global investors and businesses to participate in international transactions in a neutral cost efficient jurisdiction with a tried and tested legal system which protects investors and creditors rights.
  
  
• International businesses and financial services firms use companies based in the Cayman Islands for reasons of tax neutrality and not tax evasion or tax avoidance.
  
  
• The financial services industry is a regulated industry with a strong compliance and anti-money laundering culture.
  
  
• Cayman Islands companies play an important part in the global economy and facilitate the allocation of capital to both developed and emerging countries.
  
  
• The alternative investment fund industry helps create and support jobs all over the world.
  
  
• A very significant amount of tax revenue is indirectly generated in onshore countries via this industry (e.g. by economic activity generated in or by service providers based in those countries providing services to offshore funds).
  
  
• Alternative investment funds are not just for the wealthy, but provide diversified investment opportunities for everyone with a pension fund to earn good long term risk adjusted returns.
  
  

The Paradise Papers unfairly and misguidedly criticise institutional investors like university endowment funds and even Her Majesty the Queen for investing in Cayman Islands private equity funds. Many of the world's best hedge funds and private equity funds are domiciled in the Cayman Islands and institutional investors can take comfort from the fact that offshore alternative investment funds are a perfectly legal, normal and usual way for global investment activities to be conducted. Rather than being simply for the wealthy, most pension funds now allocate between 5-10% of their assets into offshore hedge funds and private equity funds; so everyone has funds invested indirectly in the Cayman Islands.

This offshore alternative investment funds are:

• good for investors, including pension funds, sovereign wealth funds, not-for-profit organisations and charities – and their stakeholders.
  
• tax neutral,, eliminating duplicative layers of taxes in Cayman which unfairly diminish stakeholder returns. They do not affect onshore tax revenues as investors pay their taxes in their home jurisdictions and Cayman funds pay withholding taxes in other countries on their investments. For further reference materials on this topic, The Alternative Investment Management Association (AIMA) published a paper in April 2016 entitled “Transparent, Sophisticated, Tax Neutral: The Truth about Offshore Funds”, which contains some useful content on this topic.
  
• transparent,, being at the cutting edge of regulatory and tax compliance and information exchange, Cayman is not a secrecy jurisidiction or a tax haven. Cayman authorities make reports to onshore tax authorities under tax information exchange agreements and automatically under laws based on the EU Savings Directive, FATCA and Common Reporting Standards (CRS); so investors cannot hide their money in Cayman.
  
• flexible,, cost effective access to more fund managers and more sophisticated and diversified investment strategies.
  
• good for the global economy,, money invested in Cayman is not kept in Cayman but is recycled into the global economy through international investments providing liquidity to global stock markets, providing alternative sources of financing to developing and developed economies, creating significant jobs and generating tax revenues in onshore financial centres. For example:
  
  • Cayman companies help finance and sell or lease Boeing and Airbus aircraft supporting jobs in the US and EU.
    
  • Cayman investment funds help fund important infrastructure projects in developing countries, such as power plants, roads, agribusiness and hospitals
    
  • Many companies listed on the Hong Kong Stock Exchange (HKSE) are Cayman companies, helping Asian (esp. PRC ) business issuers with ample international fund raising opportunities, and acting as an ideal platform for non-Asian business issuers to achieve exposure in the rapidly growing PRC market.
    

Anti-Money Laundering ("AML") and Combating of Terrorist Financing ("CFT")

• The Cayman Islands have been a member of the 30-nation Caribbean Financial Action Task Force ("CFATF") since its inception in 1992. (Source: CFATF website)
  
  
• Members of Cooperating and Supporting Nations of the CFATF include the United States, Canada, the United Kingdom, France, Mexico, Spain and the Netherlands. (Source: CFATF website)
  
  
• The CFATF is an Associate Member of the inter-governmental AML/CFT body, the Financial Action Task Force ("FATF"), and conducts regular peer assessments of its members based on the FATF 40+9 Recommendations, as well as 19 CFATF Recommendations. (Source: CFATF website)
  
  
• The Cayman Islands were reviewed by the CFATF in late 2007 and their report was issued in November 2007. The report recognised that the compliance culture in the Cayman Islands was well established and highly commendable.
  (Source: CFATF website)
  
  
• Of over 150 jurisdictions assessed to date by the FATF and its affiliates, against the FATF Recommendations, the Cayman Islands ranks in the top 10 jurisdictions globally, on the basis of calculating "compliant" and "largely compliant" ratings. (Source: FATF and affiliated websites)
  
  
• The Cayman Islands has been at the forefront in the Caribbean and offshore environment generally, in relation to implementing appropriate AML legislation. The Proceeds of Crime Law (2017 Revision), the Terrorism Law (2017 Revision), Misuse of Drugs Law (2017 Revision) the Anti-Money Laundering Regulations, 2017 and the application of international sanctions under Statutory instruments all reflect internationally accepted AML/CFT standards and they have been used as a model for other Caribbean nations.
  
  
• AML/CFT procedures are mandatory for all licensees, registrants and entities conducting relevant financial business. Unlike other jurisdictions, this also applies to corporate service providers and trust companies.

Transparency and Disclosure of Information

• Over the past 25 years, the Cayman Islands has invoked numerous statutory measures to cooperate with and assist foreign governments, authorities and courts with the provision of information held in the Cayman Islands. Such laws override any statutory or common law duties of confidentiality.
  
  
• Requests for information in relation to criminal matters can be made under provisions of the Criminal Justice (International Cooperation) Law, Mutual Legal Assistance (United States of America) Law, Misuse of Drugs Law and Proceeds of Crime Law. (Source: Cayman Islands Government ("CIG") website)
  
  
• The Cayman Islands is also a party to the Hague Convention 1970 on the taking of evidence abroad and can share information with other Hague Convention signatories, under the Evidence (Proceedings in Other Jurisdictions) Order. (Source: CIG website)
  
  
• In relation to regulatory matters, CIMA has the ability to entertain requests for information from any recognised overseas regulatory authority and has entered into specific information sharing bilateral memoranda of understanding with over 40 other major regulators, including the US Securities and Exchange Commission and the UK Financial Services Authority. The Cayman Islands has also entered cooperation arrangements with all EU member state regulators in order to give effect to requirements under the EU Directive on Alternative Investment Fund Managers. (Source: CIMA website)
  
  
• In relation to disclosure for tax matters, the Cayman Islands made a commitment to the OECD to adhere to their principles on exchange of tax information and transparency. (Source: CIG website)
  
  
• The Cayman Islands signed a TIEA with the United States in 2001 and requests for information have been made and responded to under this regime. In all, TIEAs have been agreed with 39 countries, over 30 of whichare in force. (Source: CIG and Cayman TIA websites)
  
  
• The Cayman Islands government has implemented FATCA and CRS which provides for automatic sharing on financial account information of account holders of Cayman Islands financial institutions to the tax authorities in the home jurisdictions of such account holders. In 2005 the Cayman Islands implemented the EU Savings Directive with equivalent legislation, which (through bi-lateral treaties with all EU states) provided for automatic information-sharing on interest income paid to EU citizens from Cayman accounts. Notwithstanding the repeal of the EU Savings Directive, the Cayman EUSD Legislation remains in force. However it is expected that it will also be repealed following the introduction of the CRS (Source: CIG and Cayman TIA websites)
  
  
• In 2005, the Tax Information Authority Law was introduced, which established the Tax Information Authority as the competent authority in the Cayman Islands for dealing with foreign tax information requests and tax reporting under, the Convention on Mutual Administrative Assistance in Tax Matters bilateral arrangements, FATCA and CRS and the EU Savings Directive equivalent legislation. (Source CIG and Cayman TIA websites)
  
  
• The Cayman Islands has committed to introduce domestic legislation in 2018 to give effect to the country by country reporting component of the OECD initiative on Base Erosion and Profit Shifting ("BEPS") to report on transfer pricing by multi-national enterprises that may be established in the Cayman Islands.