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Cayman Islands Banking

Banking in the Cayman Islands

Walking into a retail or high street bank in the Cayman Islands with a brown paper bag full of money is no way to endear yourself to the local manager. Contrary to popular novels, films, and urban myths, the Cayman Islands are by no means friendly to money laundering. Indeed, it is far easier to open a regular savings account in the US with minimal due diligence required. While there is no denying the cloudy history of this financial jurisdiction, the days of bags full of money bouncing along the Tarmac at Owen Roberts International Airport in Grand Cayman to be deposited in secret bank accounts are long gone. As part of the global fight against international financial crime the Cayman Islands, although not always given its due, has long played its part in regulating the conditions under which its own financial services sector operates. Regulated by the Cayman Islands Monetary Authority, (CIMA) the business of the financial institutions in Cayman are now more strictly governed than in some other on-shore financial jurisdictions.

From the first Mutual Legal Assistance Treaty Cayman entered into with the United States in 1986 mostly concerned with ensuring the two countries exchanged information regarding the ill-gotten gains from the drugs trade, to the more recent international treaties regarding terrorist financing, the Cayman Islands participates and strictly adheres to numerous international regulations governing international finance and banking.

Over the years a number of critics have suggested that Cayman’s compliance with such strict international regulations has undermined the growth of the offshoe financial sector as they say it can negatively impact the movement of legitimate finance and the development of wealth management. However, most people believe that Cayman’s ever increasing compliance regime is, in fact, fuelling the growth of the financial services industry. Because of the country’s strict adherence to the full gambit of international regulation rather than in spite of it, Cayman has secured its place at the top of the financial jurisdiction league.

One of the most important elements of Cayman’s modern regulatory environment is the concept of Know Your Client - ‘KYC’. In other words, banks and other financial institutions are expected to know all there is to know about the people using their services. Consequently opening a bank account in Cayman can actually be more difficult than opening an account in North America or Europe.

Several different types of licenses are offered in the Cayman Islands to the various banking institutions included restricted and trust licences, but the main two are either Class A or Class B. The rules governing the two categories are quiet complex and detailed however in essence, Class B banks are concerned mostly with offshore banking and non-resident customers with some exceptions, while Class A banks can carry on with the full gambit of banking services both on and off-shore. Of the 280 plus banks currently registered Cayman, only six banks, Cayman National, RBC, Butterfield, Scotia, First Caribbean and Fidelity offered retail services at the start of 2008 although HSBC was also scheduled to open another retail bank in the spring.

Regardless of whether you are a wealthy foreign national opening an offshore fixed rate time deposit or a migrant working opening an onshore savings account all customers are checked and double checked before they are allowed to hand over money to a Cayman bank and start doing business. Strange as it may seem Cayman’s bank managers are very uncomfortable when someone comes through their door with a lot of cash.

Those who come to live in Cayman who what to open their own local account must provide a written and signed reference from either a current or immediately previous bank account which must be addressed directly to the specific bank in the Cayman Islands. They must also give a letter from their local employer with details of the position they hold and their expected income. The banks will also require legitimate identification such as a passport or driver’s licence, details of the customer’s current address and a utility bill or similar proving that you live where you say you do.

Although offshore accounts are more frequently held in Cayman by non-residents many people who visit regularly, live here temporarily or reside permanently also hold offshore accounts. Aside from the obvious tax benefits, offshore accounts often yield higher interest rate over 'on-shore' retail banks and make international transactions easier for those who travel frequently or who have business interests abroad.

The vast majority of offshore accounts are held by people who reside overseas for numerous reasons. As international borders crumble in the face of global trade more and more High Net Worth individuals, rich people and corporations are seeking to avoid the restrictions or political instabilities of the countries in which they hold nationality, do business, or live.

As Cayman is tax free jurisdiction there are no capital gains, corporation, property or income taxes to pay --an obvious benefit to the wealthy and to multi-national companies. With no exchange controls to deal with businesses can move funds in and out of Cayman in any currency facilitating complex international trades and transactions. This, combined with confidentiality, (limited to legal activity) competitive rates, a compliant regime and a stable government which supports and encourages the offshore sector, makes banking in Cayman is extremely attractive to a cross section of the international community.

Offshore accounts can be opened with relatively small deposits (around US$5000 ) and with large cash deposits unacceptable most new customers transfer money from other legitimate accounts or through cheques and bankers drafts. In general these accounts are opened on behalf of individuals or corporations by financial experts who have the knowledge and experience to get the right kind of account and the best circumstances for their client. In Cayman there are hundreds and hundreds of professional leading financial experts who can help customers get the best deal with their legitimate cash.

As the world’s fifth largest banking centre in terms of liabilities, and sixth in terms of total assets Cayman’s banking success story continues. Moreover, growing instability in other financial jurisdictions and Cayman’s own increasingly stable and legitimate environment is bound to further fuel that success in the future.

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