The world of offshore has long been under attack and with each new wave of regulatory changes the end of small international financial centers is being decried. But so far IFCs have proven extraordinarily resilient.
This year marked a turning point for international financial centers (IFCs), especially those that are British Overseas Territories (BOTs) and Crown Dependencies (CDs), in terms of the future landscape on which they will compete, cooperate and provide their services.
International financial centers like the Cayman Islands have experienced over two decades of increased international pressure in the form of new regulation and greater demand for transparency.
From a financial perspective, many consider that when money goes offshore, it enters a black hole. Bank secrecy, public corruption and the constant barrage of films and books which put the offshore in a bad light contribute to this image.
“Little else is required to carry a state to the highest degree of opulence from the lowest barbarism”, claimed Adam Smith, “than peace, easy taxes and a tolerable administration of justice.”
Those who work within the industry or are familiar with the various jurisdictions know that this negative image actually bears little relation to reality.
Since the onset of the global financial crisis of 2007-08, there has been much debate about the reforms that are needed to make the international financial system more resilient to the onset of financial crises through improvements in what has come to be known as the international financial architecture (IFA).
As a result of misconception, during the
first tranche of the global financial crisis, world leaders came out on
the attack against OFCs, arguing that they are inherently bad and have
to be stopped in order to protect dwindling government tax revenue.
On Nov. 5, 2014, the International Consortium of Investigative Journalists (ICIJ) published an investigatory analysis based on a confidential cache of tax agreements approved by Luxembourg tax authorities.
Many of the smaller countries competing in financial services – including Cayman – have struggled over the years to find a balance on immigration policy. If it gets it right, Cayman will have a significant advantage over other IFCs, who are also struggling to find the right balance in their immigration policies.