I just came back from a cruise that included a stop at George Town, Grand Cayman. Many people on the ship joked that this was an intended, featured port of call as they wanted to check up on their shekels in the island’s banks. Let me sort this out for you.
Grand Cayman, situated in the Caribbean, is the fifth largest financial center in the world. I kid you not. Number five on the hit parade. With no direct taxation, the island has a thriving offshore banking and finance business. Although in the past, it was really focusing on high-net-worth individuals, its target recently has been towards the institutional business. In fact, there are currently 295 banks and trust companies licensed by the Cayman Islands Government and some 19 of them have the Category “A” licenses, which allow them to carry on business with both residents and nonresidents of the island.
I went into one bank to obtain information about opening a bank account. I wasn’t told of any minimum but the conversations with the bank officer hadn’t gotten that far and I had the distinct feeling the two nickels I was rubbing together in my pocket wouldn’t suffice. He wanted me to know the advantages of opening a Cayman Islands bank account, which are:
• No capital gains tax, corporation tax, withholding tax, property tax, payroll tax, or income tax payable by employees.
• An absence of exchange control, allowing free transfer of funds in and out of the islands, in any currency, with equal freedom to open and maintain accounts in any currency.
• No reserve asset requirements.
• Statutory confidentiality of client information.
• Competitiveness in the Euro currency markets.
The major banks in Grand Cayman will open an account for a new depositor on receipt of a reference from the depositor’s home banker and, for obvious reasons, they will not accept large sums in cash. Funds may be deposited in U.S. dollars or other currencies by arrangement. Apparently, the most popular method are the fixed-interest or on time deposits, usually for a minimum of $5,000. (I still have those two nickels.)Supporting all of this is an array of highly skilled legal, accounting and other professional advisors. In fact, on the wall in the center of town is a listing of accounting firms and the Big Four are all represented plus many of the larger regional firms from the U.S., and abroad.
I did hear a number of people on the ship claim that this was a good way to avoid U.S. taxes. Perhaps in years past it was, but after speaking with a professional advisor, I learned that the Cayman Islands Government in recent years has taken strong action to protect and enhance the reputation of the islands as a base for offshore financial operations. In fact, this action includes the signing of a Mutual Legal Assistance Treaty with the U.K. and the U.S. aimed at narcotics-related and other crime, though specifically excluding tax offenses which do not exist in the Cayman Islands. Yeah, you read that right!
Incidentally, the private trust is a prime attraction in George Town. The attraction of Cayman as a jurisdiction in which to establish a trust is also clear: in recent years, as the popularity of the trust concept has grown worldwide, so have the cadres of experts in trust formation and administration in the Cayman Islands. Consequently, that expertise, and more importantly, the legislation that has grown out of it, have attracted a large trust business to the Islands to the extent that there are now more trust assets under management than there are deposits in banks.
Whatever it may be, I noticed a rush of a significant number people to the various banks once we docked, and I don’t think it was to change traveler’s checks.
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