Ugland House Explained | US GAO Report on Ugland House

Report by the United States Government Accountability Office ("GAO") to the US Senate Finance Committee

published July 2008

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In 2008, the US GAO travelled to the Cayman Islands to prepare a report for Congress on the nature of US businesses registered at Ugland House. Maples and Calder made several senior lawyers available to help the GAO understand the types of businesses registered at Ugland House, the business and financial reasons for Cayman Islands registration and the services that Maples and Calder provides to those businesses. This report summarises the GAO's findings.

Below are excerpts from the GAO report.

pp. 3, 15 – Five percent of the entities registered at Ugland House are wholly owned by US persons.
p. 4 – Factors that attract U.S.-related financial activity to the Cayman Islands include its reputation for stability and compliance with international standards, its business-friendly regulatory environment and its prominence as an international financial center.
p. 7 – As a major international financial centre, the Cayman Islands attracts a high volume of financial activity in sectors related to banking, hedge-fund formation and investment, structured finance and securitisation, captive insurance, and general corporate activities.
p. 10 – Maples and Calder's business is to facilitate Cayman Islands-based international financial and commercial activity for a clientele of primarily international financial institutions, institutional investors, and corporations.
p. 11 – Maples and Calder verifies and keeps records on the beneficial owners of entities to which they provide services, the purpose of the entities, and the sources of the funds involved.....In contrast, state laws which govern the creation of corporations in the United States generally do not require company formation agents to collect ownership information on the entities that they register.
p. 26 – While the Cayman Islands is one of a number of OFCs that attract substantial financial activity from the United States due to tax and other benefits, the Cayman Islands offers a combination of additional factors that may draw U.S. activity. In particular, the Cayman Islands is generally regarded as having a stable and internationally compliant legal and regulatory system, a business friendly regulatory environment, and a reputation as a prominent international financial center.
p. 27 – Officials from OPIC report that, as an investor, it is important to OPIC that private-equity funds it invests in be organized in a jurisdiction with strong legal protections for creditors, such as the Cayman Islands.
p. 28 – Similarly, officials from the Export-Import Bank of the United States ("Ex-Im") stated that Cayman Islands law gives them confidence that they will have less difficulty reclaiming assets if a party in an Ex-Im-backed transaction defaults.
p. 28 – [The Cayman Islands] has a robust financial services sector, which includes several major law firms and other locally based service providers, as well as prominent international accounting and audit firms, fund administrators, and banking institutions. The high volume of existing Cayman-based financial activity may also be responsible for drawing additional business.
Finally, U.S. persons may carry out activity in the Cayman Islands because of its reputation as a neutral jurisdiction for structuring deals with foreign partners.
p. 38 – the IRS official also told us that the Cayman Islands government has provided the requested information in a timely manner for all TIEA requests.
p. 44 – Officials from Treasury and the SEC reported that the Cayman Islands has been cooperative in sharing information and SEC reported that several of the SARs have led to U.S. investigations.
p. 46 – A senior official from DOJ's Office of International Affairs indicated that the Cayman Islands is the busiest United Kingdom overseas territory with regard to requests for information, but also the most cooperative. She also said that the Cayman Islands is one of DOJ's "best partners" among offshore jurisdictions.
p. 46 – A DOJ official reported that the Cayman Islands has an agreement to share proceeds of criminal-asset forfeitures with the U.S. government, and has been a very cooperative partner.