Much discussion has taken place of late on the topic of whether the Cayman Islands as a jurisdiction should have signed the Model 1 agreement with the United States authorities with regard to the Foreign Account Tax Compliance Act (FATCA), and similar with the UK authorities.
Some see the inking of these agreements as a further erosion of Cayman’s strict privacy laws that have helped the location build a successful wealth management industry for those who need to keep their financial affairs private for reasons of safety and so on.
Doing away with privacy can only be of detriment to the island, they say.
I see the signing of these agreements as a positive move for the islands that can reap rewards not only for the financial services industry but the real estate industry as well, and thereby the economy as a whole.
But we have to be clever about it.
Cayman: leading the way in compliance
Since 1996 with the introduction of the Proceeds of Criminal Conduct Law, the Cayman Islands has been a leading example of an offshore jurisdiction that upholds rigorous international standards with regard to money laundering and the proceeds of criminal conduct.
This jurisdiction has led the way regionally when it comes to implementing legislation that deals with such issues. The Cayman Islands was one of the first Caribbean countries to agree a Mutual Legal Assistance Treaty and then a Tax Information Exchange Agreement with the U.S., and has since become one of the first countries to execute a Model 1 agreement under FATCA. On a global scale, the Cayman Islands is a member of the OECD Global (Tax) Forum Steering Group, has committed to signing the OECD Convention on Mutual Administrative Assistance in Tax Matters and has recently joined with 29 other financial centers to support an OECD sponsored “common reporting standard.”
In light of this exemplary behavior, I believe we should expect something in return. In response to this jurisdiction’s excellent compliance culture the United States and the United Kingdom should do all it can to ensure that each country’s respective public be fully informed of the legitimacy of how we operate. Instead, the myth that the jurisdiction is somehow crooked continues to be perpetuated among the media, by politicians and on television.
The Cayman Islands has somehow become a poster boy for an offshore location which welcomes criminal activities, a reputation that is completely unfounded. Such harmful references perpetuate a situation that doesn’t exist; as we all know, it’s a myth and damages the island’s reputation. It is time that those onshore recognize our value within the global financial services system and shout loudly about our jurisdiction’s compliance to that effect.
Having our compliance to global standards loudly backed by the U.S. and U.K. authorities and financial institutions will have a beneficial impact on the industry because more onshore service providers will become better informed as to how we operate and therefore be more inclined to suggest Cayman entities service their clients, when an offshore component of their wealth management strategy is required.
Cayman has long since realized that, just as the cream always rises to the top, it should be attracting the best possible legitimate clientele and has gone out of its way to ensure that this is so.
Confident clients mean more by way of investors willing to purchase property in the Cayman Islands as a way of diversifying their entire investment portfolio. We are an excellent location for overseas investors looking to buy a second or third home here: we have a wide array of accommodation for potential investors – for those looking for a modest investment around the $500,000 mark all the way up to multi-million dollar homes; we offer the same high quality of amenities and services that such investors have come to expect; and we offer a safe and secure environment which means Cayman is the perfect location for entertaining the entire family.
Medical tourism – benefits for real estate industry only in the long term
The issue of medical tourism has quickly become an exciting topic of interest for the Cayman Islands in recent years as the reality of a first class medical establishment geared towards medical tourism takes shape. Now, about to open its doors to its first patients, the Cayman Islands Health City hospital is finally a tangible reality.
I believe this will bring much needed jobs for local people which will in turn inject more money into the economy as a whole. But I will reiterate my stance as far as the project’s benefits to the real estate industry and that is the benefits will be minimal at least in the short term.
As far as the real estate industry goes, it would be hoped that patients who enjoy recuperating here will love the island so much that they will be compelled to purchase property as a holiday home. In addition, new workers to the island employed in Health City will hopefully feel the desire to invest in real estate once they begin living and working in this beautiful paradise. But I think it will take quite a while for patients to make the connection and purchase real estate in any meaningful numbers.
Likewise, I think most foreign workers will choose to rent accommodation here until they decide to put down firm roots, so although we may see the odd physician or surgeon looking to purchase property from the outset, I do believe it will be a while before the real estate industry reaps meaningful rewards from medical tourism. It is, none-the-less, a welcome diversification of our economy and a positive move forward for the country as a whole.