Within the past three decades, the Cayman Islands have developed as a thriving financial centre, home to many of the world's leading banks, trust companies, investment agencies, accounting and law firms. The banking and trust industry continues to contribute significantly to Cayman's development, as a truly ‘one-stop-shop' for established institutional and private investors.

The catalyst for this development can be traced to the 1960s, when international banking was introduced. A decade later, the trust element was added and estate planning gained popularity. Today, in financial communities worldwide – the Cayman Islands are recognised as a leading sophisticated financial centre.

With more than US$700bn in bank assets, Cayman is now one of the largest banking centres in the world. Currently, some 464 banks and trust companies are licensed in the Cayman Islands, with 113 having physical operating offices in the islands. Forty-three of the world's 50 largest international banks have branches or subsidiaries in the Cayman Islands. These impressive figures are the result of Cayman's unique combination of economic stability, freedom from taxation, innovative legislation and a strong partnership between Government and the financial industry.

The Cayman Islands are a United Kingdom Overseas Territory, consisting of three islands ideally located in the Northwest Caribbean, in close proximity to both North and South America, affording visitors convenient air access with many direct flights each week from major US cities and London. Modern infrastructure and state-of-the-art telecommunications support the demands of international business; residents enjoy political stability, social harmony and one of the highest standards of living within the region.

Absence of direct taxes
There are no direct taxes in Cayman – no corporate tax, income tax, property tax, withholding tax, death duties, inheritance tax or capital gains tax. These factors, along with Cayman's proven commitment to the highest financial standards, make it an ideal jurisdiction for the accumulation and retention of wealth.

The Cayman Islands are universally considered as a leader within the premier tier of international financial centres. Cayman has been a pioneer and continues to be both innovative and progressive in the development of suitable legislation. History will show that the growth of the financial industry in the Cayman Islands has created a sophisticated, well-regulated environment that is conducive to prudent estate planning and wealth preservation.

Although privacy remains a cornerstone of the relationship between banker and customer, as it does in other jurisdictions, the introduction of the Proceeds of Criminal Conduct Law highlighted Cayman's commitment to deal only with bona fide clients. The recent international initiatives of the OECD, FATF, FSF and other groups determined Cayman to react positively to the challenges at hand, and to restate its commitment to deal only with bona fide clients. Whilst initially placed on the FATF list, primarily for not having direct anti-money laundering legislation and supporting regulations in place to uphold its good practice, these deficiencies have been addressed, legislation put in place and Cayman removed from the list. Cayman was never on the OECD list and is recognised not as a tax haven, but as a financial centre.

Factors that have made the Cayman Islands the jurisdiction of choice for offshore finance also include a full range of professional services, from lawyers, chartered accountants and professional corporate managers, to other highly skilled specialists and service providers. The modern infrastructure is also attractive, including state-of-the-art telecommunications facilities and reliable utilities. A co-operative relationship between government and the private sector, together with social, economic and political stability also strongly appeal to the more than 50,000 companies currently registered in Cayman.

In addition, laws and practices are continuously monitored and updated to ensure that the financial regulatory and supervisory framework remains in line with the highest international standards. The establishment of the Cayman Islands Monetary Authority (CIMA) on 1 January 1997 as a statutory entity responsible for the supervision of all financial services provided in the islands confirms Cayman's commitment to maintaining its role as a well-regulated jurisdiction. The CIMA's banking supervision is strictly modelled on the standards set by the Basle Committee on banking supervision.

More recently, agreement was reached so that CIMA will become an independent authority in keeping with international standards and this is progressing. As an additional safeguard, only institutions that are subsidiaries or branches of existing prime international banks will be considered for the grant of a license, except in rare circumstances. ‘Shell' banks are not permitted. Subsequent to the grant of a license, the authority maintains routine supervision of each bank, monitoring financial reports, conducting routine meetings and performing on-site examinations. Similarly, trustees are required by law to be licensed by CIMA.

In addition to enforcing the Banks and Trust Companies Law 1995 (revised) and other relevant statutory provisions, the authority subscribes to the ‘know your client' tenet, a legal requirement that all service providers practice due diligence in screening client activity. This co-ordinated effort results in effective and flexible regulation.

Financial service providers previously adhered to a Code of Best Practice (which replaced the 1990 Code of Conduct) that detailed the parameters and guidelines within which practitioners should operate. Modelled on provisions within the Proceeds of Criminal Conduct Law, a progressive piece of legislation which criminalises laundering or assisting to launder the proceeds of crime, the Code of Best Practice was developed and self-imposed by Cayman's local financial community as an additional preventative measure.

This year, guidance notes for the jurisdiction were approved. To enforce anti-money laundering initiatives, the anti-money laundering regulations that were introduced now have the effect of enforcing the guidance notes. Whilst anti-money laundering courses were held across the financial industry to broaden the awareness of all staff last year, training in this area continues on an on-going basis.

The Cayman Islands also have had in place since 1990 a Mutual Legal Assistance Treaty (MLAT) with the US and the UK, to set the rules and conditions for international co-operation in the combat against crime.

Confident in its regulatory regime, Cayman was the first jurisdiction to voluntarily open itself to inspection by the Caribbean Financial Action Task Force (CFATF), the regional offshoot of the FATF. Its measures to combat international financial crime are recognised by the long list of prestigious institutions whose presence demonstrates continued confidence in Cayman's regulatory environment. British, Canadian, Swiss and US banks rub shoulders with household banking names from South America, Asia and Europe. Among these institutions, the investor in Cayman will find a complete range of retail, wholesale and fiduciary services.

Equally impressive is Cayman's trust industry, with the world's most respected trust companies handling private banking clients and corporate structures, the complexity of which was unheard of until relatively recently. As a well-established trust jurisdiction, Cayman is equipped to offer the most modern trust arrangements. The effectiveness of Cayman's trust legislation is a crucial aspect of this development, as borne out by the way trusts domiciled in Cayman have remained intact, even during recent significant test cases involving settlers' dependents in cases of forced heirship.

First-rate centre
Still, the best measure of Cayman's success is found in the overall first-rate financial centre that has developed around the banking and trust industry and includes mutual funds, insurance, company and vessel registration and the Cayman Islands Stock Exchange, which has now received the a stamp of approval from the London Stock Exchange.

International lawyers have increasingly been directing mutual funds, bond issues and captive insurance business to Cayman, secure in the knowledge that Cayman's professional firms have the capability to respond with a level and depth of experience unparalleled in the offshore world.

To transact business in the Cayman Islands, a prospective client will need to be introduced to a banker, who will ask for references which must clearly confirm a previously-existing relationship with an onshore banking institution, in addition to positive identification and other opening of account requirements. Cayman bankers will advise on what can be done here and what services are available, but they will emphasise the need to obtain competent tax and legal advice in the home jurisdiction. This is important and may be complex in nature.

For example, for anyone seeking long-term wealth preservation, a trust may be the most suitable vehicle. The trust concept has its origins in common law and customers from civil code countries may have a number of potential conflicts to consider. Although the laws in Cayman provide clear direction on such conflicts, a full understanding of exactly what is involved is essential. Similarly, if one wishes to set up a Cayman corporation and have it managed by a local service provider, there are a number of key questions regarding directors, officers and ownership that need to be addressed.

The Cayman Islands Bankers' Association, to which all major banks and trust companies belong, was founded in 1979 and currently has 80 ordinary and 97 associate members. Its main objectives are to further the development of the Cayman Islands as an international banking and financial centre, to preserve the good reputation of the islands, to liaise on behalf of its members with government, business and other professional associations and to foster the education of, particularly, younger people employed in the financial field.

All members of the association adhere to the recently introduced guidance notes, which ensure adherence to high professional and ethical standards.

In addition to its many initiatives in the training and education field, every two years since 1987 the Cayman Islands Bankers' Association has organised an international conference that has created a name for itself and became a consolidated event in the calendar of the offshore financial world.

The eighth conference took place in November 2001 in Grand Cayman under the banner of ‘The Future Is Now'. The conference programme contained a balanced mix of high calibre international and local speakers, who addressed important subjects in the contemporary world of international finance and their consequences to the financial industry of the Cayman Islands.

The ultimate objective of the conference was to offer delegates an opportunity to enhance their knowledge about the financial industry in Cayman, learn about the joint efforts of the Government and the private sector to improve Cayman's leading role as a top-quality, well-regulated jurisdiction and to exchange experiences with fellow professionals, who will be lecturing or attending the event.

And all of it took place in a warm and relaxing environment, surrounded by the blue sea of the Caribbean.

For further information, please call +1 (345) 949-0330; fax +1 (345) 945-1448, or e-mail ciba@candw.ky

The banks and trust companies in the Cayman Islands stand ready to be a competent partner in international ventures.