Editing Economy of the Cayman Islands (section)

===Financial services industry===
[[File:Butterfield Bank in Georgetown, Grand Cayman.jpg|thumb|upright|[[Butterfield Bank]] in [[George Town, Cayman Islands|George Town]]]]

The Cayman Islands is a major international financial centre. The largest sectors are "[[banking]], [[hedge fund]] formation and investment, structured finance and securitisation, [[captive insurance]], and general corporate activities".<ref name="GAO">United States Government Accountability Office (2008). [http://www.gao.gov/new.items/d08778.pdf GAO Report to the Chairman and Ranking Member], Committee on Finance, U.S. Senate, p. 7.</ref> Regulation and supervision of the [[financial services]] industry is the responsibility of the [[Cayman Islands Monetary Authority]] (CIMA). Sir Vassel Johnson was a pioneer of Cayman's financial services industry.

Sir Vassel, who became the only Caymanian ever knighted in 1994, served as the Cayman Islands financial secretary from 1965 through 1982 and then as an Executive Council member from 1984 through 1988. In his government roles, Sir Vassel was a driving force in shaping the Cayman Islands financial services industry.<ref>{{Cite web |url=http://www.gov.ky/portal/page/portal/cighome/pressroom/archive/200811/governorstributetosirvassel |title=Governor's Tribute to Sir Vassel |access-date=25 June 2018 |archive-date=16 June 2018 |archive-url=https://web.archive.org/web/20180616115203/http://www.gov.ky/portal/page/portal/cighome/pressroom/archive/200811/governorstributetosirvassel |url-status=dead }}</ref>

The Cayman Islands is the fifth-largest banking centre in the world,<ref>[http://www.economist.com/node/8695139 Places in the sun]. (24 February 2007). The Economist, no. 382 (8517 suppl.), 3–5.</ref> with $1.5 trillion in banking liabilities {{as of|lc=y|June 2007}}.<ref name="GAO"/> In March 2017 there were 158 banks, 11 of which were licensed to conduct banking activities with domestic (Cayman-based) and international clients, and the remaining 147 were licensed to operate on an international basis with only limited domestic activity.<ref>{{cite web|url=https://thebanks.eu/articles/banking-sector-of-the-Cayman-Islands|title=Banking Sector of the Cayman Islands|website=thebanks.eu|date=30 May 2016 }}</ref> Financial services generated KYD$1.2 billion of GDP in 2007 (55% of the total economy), 36% of all employment and 40% of all government revenue. In 2010, the country ranked fifth internationally in terms of value of liabilities booked and sixth in terms of assets booked. It has branches of 40 of the world's 50 largest banks. The Cayman Islands is the second largest [[captive insurance#Domicile|captive domicile]] (Bermuda is largest) in the world with more than 700 [[captive insurance|captives]], writing more than US$7.7 billion of premiums and with US$36.8 billion of assets under management.<ref>Cayman Islands Monetary Authority (11 July 2008), [http://www.cimoney.com.ky/section/regulatoryframework/sub/default.aspx?section=PD&id=666 Regulatory Framework: Statistics]. Retrieved 25 July 2008 from: {{webarchive |url=https://web.archive.org/web/20090718114432/http://www.cimoney.com.ky/section/regulatoryframework/sub/default.aspx?section=PD&id=666 |date=18 July 2009 }}</ref>

There are a number of service providers. These include global financial institutions including [[HSBC]], [[Deutsche Bank]], [[UBS]], and [[Goldman Sachs]]; over 80 administrators, leading accountancy practices (incl. the [[Big Four auditors]]), and offshore law practices including [[Maples & Calder]].<ref name="HedgeWeek">[http://www.hedgeweek.com/2005/10/01/bringing-caymans-mutual-funds-law-speed Bringing Cayman's Mutual Funds Law up to speed]. ''Hedge Week'' (1 October 2005).</ref> They also include wealth management such as [[Rothschild & Co|Rothschilds]] private banking and financial advice.<ref>{{cite web|url=http://privatebankingandtrust.rothschild.com/page.aspx?id=139|title=Rothschild – Wealth Management & Trust – Cayman Islands|publisher=nucleus.co.uk|url-status=dead|archive-url=https://web.archive.org/web/20160715044601/http://privatebankingandtrust.rothschild.com/page.aspx?id=139|archive-date=15 July 2016}}</ref>

Since the introduction of the [[Mutual fund|Mutual Funds]] Law in 1993, which has been copied by jurisdictions around the world,<!---the "copied" phrase needs to be broken out as a separate stand-alone sentence and justified with a ref and not be a throwaway phrase in the middle of another sentence---> the Cayman Islands has grown to be the world's leading offshore hedge fund jurisdiction.<ref name="HedgeWeek"/> In June 2008, it passed 10,000 hedge fund registrations, and over the year ending June 2008 CIMA reported a net growth rate of 12% for hedge funds.<ref>{{cite web |url=http://www.caycompass.com/cgi-bin/CFPnews.cgi?ID=1032423 |title=10,000–plus funds registered in CI |publisher=Caycompass.com |date=29 July 2008 |access-date=31 July 2011 |url-status=dead |archive-url=https://web.archive.org/web/20110728132304/http://www.caycompass.com/cgi-bin/CFPnews.cgi?ID=1032423 |archive-date=28 July 2011  }}</ref>

Starting in the mid-late 1990s, [[offshore financial centres]], such as the Cayman Islands, came under increasing pressure from the [[OECD]] for their allegedly harmful tax regimes, where the OECD wished to prevent low-tax regimes from having an advantage in the global marketplace. The OECD threatened to place the Cayman Islands and other [[financial centres]] on a "black list" and impose sanctions against them.<ref name="Rogoff">{{cite web|url=https://www.pbs.org/wgbh/pages/frontline/shows/tax/schemes/cayman.html |title=Haven or havoc? |publisher=Pbs.org |access-date=31 July 2011}}</ref> However, the Cayman Islands successfully avoided being placed on the OECD black list in 2000 by committing to regulatory reform to improve transparency and begin information exchange with OECD member countries about their citizens.<ref name="Rogoff"/>

In 2004, under pressure from the [[United Kingdom|UK]], the Cayman Islands agreed in principle to implement the [[European Union Savings Directive]] (EUSD), but only after securing some important benefits for the financial services industry in the Cayman Islands. As the Cayman Islands is not subject to [[European Union|EU]] laws, the implementation of the EUSD is by way of bilateral agreements between each EU member state and the Cayman Islands. The government of the Cayman Islands agreed on a model agreement, which set out how the EUSD would be implemented with the Cayman Islands.<ref>{{cite web |url=http://www.ask.bm/uploaded/Publication/641_File_5.pdf |title=Guide to the EU Savings Directive|access-date=31 July 2011 |url-status=dead |archive-url=https://web.archive.org/web/20110728190459/http://www.ask.bm/uploaded/Publication/641_File_5.pdf |archive-date=28 July 2011  }}</ref>

A report published by the [[International Monetary Fund]] (IMF), in March 2005, assessing supervision and regulation in the Cayman Islands' banking, insurance and securities industries, as well as its [[money laundering]] regime, recognised the jurisdiction's comprehensive regulatory and compliance frameworks. "An extensive program of legislative, rule and guideline development has introduced an increasingly effective system of regulation, both formalizing earlier practices and introducing enhanced procedures", noted IMF assessors. The report further stated that "the supervisory system benefits from a well-developed banking infrastructure with an internationally experienced and qualified workforce as well as experienced lawyers, accountants and auditors", adding that, "the overall compliance culture within Cayman is very strong, including the compliance culture related to AML (anti-money laundering) obligations".<ref>{{cite web|url=http://www.caymanfinance.gov.ky/portal/page?_pageid=1186,1549172&_dad=portal&_schema=PORTAL |archive-url=https://web.archive.org/web/20090205053506/http://www.caymanfinance.gov.ky/portal/page?_pageid=1186%2C1549172&_dad=portal&_schema=PORTAL |url-status=dead |archive-date= 5 February 2009 |title=Cayman Islands Financial Services |work=caymanfinance.gov.ky }}</ref><ref>[http://www.rhesq.com/Terrorism/Caymans%20in%20Perspective.pdf Money Laundering in the Cayman Islands: A Global Perspective], ''Cayman Financial Review'', Third Quarter, 2010</ref>

On 4 May 2009, the United States President, [[Barack Obama]], declared his intentions to curb the use of financial centres by multinational corporations. In his speech, he singled out the Cayman Islands as a tax shelter.<ref>{{cite web |author=The Crave |url=http://www.politicalcrave.com/2009/05/04/transcript-obama-preaches-hypocrisy-against-tax-havens-and-tax-loopholes/ |title=Transcript: Obama Preaches Against Tax Havens And Tax LoopHoles |publisher=Political Crave |date=22 October 2010 |access-date=31 July 2011 |url-status=dead |archive-url=https://web.archive.org/web/20110715103017/http://www.politicalcrave.com/2009/05/04/transcript-obama-preaches-hypocrisy-against-tax-havens-and-tax-loopholes/ |archive-date=15 July 2011  }}</ref> The next day, the Cayman Island Financial Services Association submitted an open letter to the president detailing the Cayman Islands' role in international finance and its value to the US financial system.<ref>{{cite web |url=http://news.prnewswire.com/DisplayReleaseContent.aspx?ACCT=104&STORY=/www/story/05-05-2009/0005019996&EDATE= |title=An Open Letter to President Obama From the Cayman Islands Financial Services Association |publisher=News.prnewswire.com |date=5 May 2009 |access-date=31 July 2011 |url-status=dead |archive-url=https://web.archive.org/web/20130626102618/http://news.prnewswire.com/DisplayReleaseContent.aspx?ACCT=104&STORY=%2Fwww%2Fstory%2F05-05-2009%2F0005019996&EDATE= |archive-date=26 June 2013  }}</ref>

The Cayman Islands was ranked as the world's second most significant tax haven on the [[Tax Justice Network]]'s "Financial Secrecy Index" from 2011, scoring slightly higher than [[Luxembourg]] and falling behind only [[Switzerland]].<ref>[https://web.archive.org/web/20130828000235/http://www.financialsecrecyindex.com/2011results.html Financial Secrecy Index 2011]. financialsecrecyindex.com</ref> In 2013, the Cayman Islands was ranked by the [[Financial Secrecy Index]] as the fourth safest tax haven in the world, behind [[Hong Kong]] but ahead of [[Singapore]]. In the first conviction of a non-Swiss financial institution for US tax evasion conspiracy, two Cayman Islands financial institutions pleaded guilty in Manhattan Federal Court in 2016 to conspiring to hide more than $130 million in Cayman Islands bank accounts. The companies admitted to helping US clients hide assets in offshore accounts, and agreed to produce account files of non-compliant US taxpayers.<ref>[http://www.caribbeannewsnow.com/headline-Cayman-financial-firms-plead-guilty-to-%24130-million-tax-conspiracy-29604.html "Cayman financial firms plead guilty to $130 million tax conspiracy"] {{Webarchive|url=https://web.archive.org/web/20171107004153/http://www.caribbeannewsnow.com/headline-Cayman-financial-firms-plead-guilty-to-%24130-million-tax-conspiracy-29604.html |date=7 November 2017 }}, ''Caribbean News Now'', 10 March 2016</ref>

====Foreign Account Tax Compliance Act====
On 30 June 2014, the tax jurisdiction of the Cayman Islands was deemed to have an inter-governmental agreement (IGA) with the United States of America with respect to the "[[Foreign Account Tax Compliance Act]]" of the United States of America.<ref name=treasury/>

The Model 1 Agreement recognizes:<ref name=treasury>[https://www.treasury.gov/resource-center/tax-policy/treaties/Documents/FINAL%20US%20-%20Cayman%20Islands%20-%20Cayman%20alternat.pdf Agreement between the Government of the Cayman Islands and the Government of the United States of America to Improve International Tax Compliance and to Implement FATCA]. US Treasury Tax Policy Treaties</ref>

* The [[Tax Information Exchange Agreement]] (TIEA) between the United States of America and The Cayman Islands which was signed in London, United Kingdom on 29 November 2013. Page 1 – Clause 2 of the FATCA Agreement.<ref name=treasury/>
* The Government of Great Britain and Northern Ireland provided a copy of the Letter of Entrustment which was sent to the Government of the Cayman Islands, to the Government of the United States of America "via diplomatic note of October 16, 2013".
* The Letter of Entrustment dated 20 October 2013, The Govt of Great Britain and Northern Ireland, authorized the Govt of the Cayman Islands to sign an agreement on information exchange to facilitate the Implementation of the Foreign Account Tax Compliance Act  – Page 1 – Clause 10.<ref name=treasury/>

On 26 March 2017, the US Treasury site disclosed that the Model 1 agreement and related agreement were "In Force" on 1 July 2014.

====Sanctions and Anti-Money Laundering Act====
Under the UK Sanctions and Anti-Money Laundering Act of 2018, beneficial ownership of companies in British overseas territories such as the Cayman Islands must be publicly registered for disclosure by 31 December 2020.<ref name=kmppvap>{{cite web| url = https://www.lawgazette.co.uk/law/overseas-territories-to-fight-public-register-demands/5066370.article| title = Overseas territories to fight public register demands {{!}} News {{!}} Law Gazette}}</ref> The Government of the Cayman Islands plans to challenge this law, arguing that it violates the Constitutional sovereignty granted to the islands.<ref name=kmppvap /> The British [[National Crime Agency]] said in September 2018 that the authorities in the Cayman Islands were not supplying information about the beneficial ownership of firms registered in the Cayman Islands.<ref>{{cite news |title=UK frustrated by Cayman Islands silence on money laundering |url=https://www.bbc.co.uk/news/uk-45525976 |access-date=15 September 2018 |work=BBC News |date=15 September 2018}}</ref>