A lot has changed in the Cayman Islands since OffshoreAlert was launched in February 1997.
Back then, there was only one main newspaper and one telecommunications carrier, banks were ultimately regulated by the Cabinet, whose members sometimes served as directors of the financial institutions they were regulating, requests for judicial assistance from foreign governments were automatically rejected if they contained the word ‘tax’, and Cayman based its marketing campaign around secrecy, a word that invites suspicion. Oh, and OffshoreAlert was shunned by the establishment, apparently for no other reason than it was dedicated to exposing serious financial crime.
How times have changed, for the better. Twelve years later, there is an abundance of competing news media, which is one of the most sincere signs of a healthy democracy; the telecommunications industry has been de-regulated, bringing with it an improvement in quality and a lowering of cost; the authority to issue and revoke bank licences has passed from politicians to an independent regulator, the Cayman Islands Monetary Authority; tax information exchange agreements have been signed with several countries and secrecy is a thing of the past. Furthermore, OffshoreAlert is so popular locally that Cayman sends more speakers and delegates to the annual OffshoreAlert Financial Due Diligence Conference than any country outside the USA, thereby demonstrating a genuine desire among practitioners to be responsible players in the international financial services industry.
The advances made by Cayman are, perhaps, best illustrated by a comparison with the jurisdiction that has long-been considered the gold standard among offshore financial centres – Bermuda, a country with which I am very familiar, having lived there from 1990 to 1996 and covered as a financial journalist for the last 19 years.
In 1997, Bermuda was out on its own as the leading offshore jurisdiction in the Bermuda-Caribbean region in terms of quality and sophistication of products, services and infrastructure; political and regulatory maturity; legal efficiency and, by extension, international reputation. Cayman was a distant second.
In 2009, that is no longer the case. Cayman is, in my opinion, at least on a par with Bermuda as an OFC in all material respects and might even be better. Indeed, in the March 2009 edition of The Global Financial Centres Index published by the City of London Corporation, in England, Cayman was ranked 22nd of 62 financial centres in terms of competitiveness, based on statistical techniques and perceptions obtained by market practitioners and regulators around the world, while Bermuda came in at 27.
Despite many substantial and meaningful developments, the perception of Cayman among the world’s financial journalists is as negative today as it has ever been. I know this because barely a week goes by without a print, television or radio journalist from somewhere in the world calling me for information about OFCs or businesses and individuals operating in them for a story that he or she is researching. Many of these journalists do not know much about OFCs, nor should they, considering they do not specialise in this highly complex area of international finance and only occasionally write about it. What little they do know is often based on unflattering stereotypes that are sometimes inaccurate, such as the enduring notion that OFCs such as Cayman do not cooperate with investigations by foreign governments, when the reality is that they have done so for many years.
In particular, there is little or no appreciation by foreign journalists of the substantial differences that exist between jurisdictions. To many of them, all OFCs are alike. Cayman is the same as Antigua, Bermuda is no different than Barbados, and the Bahamas is like Grenada, all comparisons that knowledgeable people know are grossly unfair. In conversations I have with them, journalists frequently mix-up Bermuda with the Bahamas, apparently simply because both are islands whose names begin with ‘B’ and contain seven letters.
Anthony Travers, chairman of the Cayman Islands Financial Services Authority, recently castigated Cayman’s financial sector for failing to invest in public relations initiatives in the past. I could not agree more. But a change in the attitude toward journalists of industry practitioners, Mr Travers included, is needed as much as throwing money at the problem. A senior writer with The Wall Street Journal told me that, during a trip to Cayman in the late 1990s, he decided to observe a meeting of the Legislative Assembly and, to his bewilderment, a security guard at the building’s entrance confiscated his notebook because he was not an ‘accredited journalist’ in Cayman. I had a similar experience, once being told to leave the press box of the LA for not being ‘accredited’. Such parochial behaviour is indefensible in a civilised society, particularly one that is trying to hold itself out as a sophisticated global financial centre.
In the 1990s, when Cayman was promoting itself principally as a secrecy haven, the jurisdiction went out of its way to avoid publicity, thereby creating the impression that the type of business conducted in the jurisdiction could not stand up to public scrutiny, either legally or morally.
Now that it has legislation that is acceptable to the international community and improved the quality of its regulatory regime, the jurisdiction’s stakeholders must go out on the international stage and confidently let the world know that the new Cayman is more about substance and innovation and less about smoke-and-mirrors.
Unfortunately for Cayman, after spending so many years promoting secrecy, there is no quick way to fix its public image problem. It will take a carefully-planned, a well-financed PR campaign over the long-term, coupled with the internal measure of educating industry practitioners about dealing with the media, to rehabilitate the jurisdiction’s image.
Educational press briefings must be organised in major onshore financial centres like London, New York, Washington, DC, and Miami and advertisements should be taken out in major newspapers such as The Wall Street Journal, The New York Times and the Financial Times. Instead of being avoided, as has happened in the past, financial journalists should be actively sought out, wined and dined, and given home, office and mobile telephone numbers of key people to call whenever they require assistance. Remember, journalists typically work on tight deadlines and need immediate access to information. Saying you will get back to them in a day or so is as ineffective as telling them to ‘get lost’. For anyone concerned about being quoted, journalists are often simply seeking information on an off-the-record basis. Given the complexities of the offshore world, many times they just want someone to explain what the heck is going on.
On another front, I encourage more Cayman practitioners to follow the leads of Tim Ridley, a former senior partner of Maples and Calder law firm and former chairman of the Cayman Islands Monetary Authority, and Eduardo D’Angelo Silva, a long-time banker in Cayman who is vice chairman of the Cayman Islands Financial Services Association. For the last several years at the annual OffshoreAlert Financial Due Diligence Conference in Miami, one or both of Messrs Ridley and Silva have spoken passionately and articulately in support of OFCs alongside some of the offshore world’s biggest critics, such as Jeffrey Owens, director of the Centre for Tax Policy and Administration, Organisation for Economic Co-operation and Development; Bob Roach, counsel and chief investigator on United States Senator Carl Levin’s US Permanent Subcommittee on Investigations; and the heads of the US Internal Revenue Service’s offshore programmes and initiatives.
Debating the ‘enemy’ heads-up, particularly at major conferences that attract journalists and pro- and anti-offshore attendees from all over the world, is far more productive than accepting ‘safe’ speaking engagements at offshore conferences that are held in offshore jurisdictions and attended only by offshore practitioners and where the only press coverage comprises puff-pieces in local newspapers. More offshore practitioners need to come out of their comfort zones and stop acting like they are ashamed of what they do.
Given the material changes that have taken place in the jurisdiction, the message that Cayman’s efficiency and innovation is healthy for the global economy can be delivered more with a straighter-face today than it could 12 years ago. So go out there and deliver it.