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It does not take long for a visitor to the Caymans to realise that the 1993 film The Firm still arouses the ire of those in the Cayman financial sector. Even today in certain circles Cayman is synonymous with money laundering and other financial misdeeds. Others however recognise that Cayman is far from the world’s money laundering haven and is in fact exploited by fraudsters because of its record of political and financial stability. You’re working electronically; yet somehow you’re still accumulating
paper. There’s a warehouse (or two) full of the stuff and no one is
really sure what’s in there. Most of it has been digitised… and you’re
keeping the paper, “just in case” the scanning was poor, or there’s a
computer virus, or in the event of a court case, or an audit, or a
business need for the records There are a number of bills that have been introduced in the US
Congress that, if enacted, could impact Cayman Island domiciled
captives and/or their shareholders or affiliated group In the last issue of the Cayman Financial Review, Charles Jennings provided a snapshot of the major external challenges facing the financial industry of Cayman and other ‘offshore’ financial centres. Technology has provided the tools for companies to engage in business in any corner of the world and to be managed from any location. Cayman’s tax neutral platform and security as a United Kingdom overseas territory, as well as its reputation for efficiency and an abundance of financial expertise, provides an advantage over other international financial centres. The recent rhetoric of the G20, OECD and other international bodies includes official corruption as a critical global problem. This is then tied back to ‘tax havens’ and ‘bank secrecy’, i.e. offshore financial services centres are active participants in processing the proceeds of official corruption, particularly corruption in the impoverished third world. This despite hard evidence to the contrary from several respected sources – for example the Turner Review (p74, March 2009) which specifically acknowledges that ‘the role of offshore financial centres was not central in the origins of the current crisis’. In the midst of an international recession, it hardly seems that this is an appropriate moment to express optimism. It also appears to be a poor time to give a pat on the back to legislators, especially since government mistakes such as misguided monetary policy and housing subsidies are responsible for much of the world’s current financial turmoil. In this article we look at the implications of this battering on capital regulation. We look specifically at the Basel 2 framework in the course of implementation around the world; some have questioned whether the new approach is still relevant and whether the crunch has shown it to be misguided.
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