The Cayman Islands, one of the world’s best-known tax havens, may soon give international authorities better access to information about companies that have long been shrouded in secrecy, reports CBS News.
Lawmakers in the Cayman Islands are expected to vote in the next week on a trio of bills that would pave the way for law enforcement, especially in the United Kingdom, to rapidly learn more about some of the nearly 100,000 companies registered in the tiny island territory.
The Cayman Islands, a U.K. territory long considered to be an offshore tax haven, has never previously maintained a centralized registry of ownership information. The creation of the registry, if approved, would be the result of pressure applied by the British government, according to Jason Sharman, a professor of International Relations at the University of Cambridge in Britain.
“The Caymans and other British territories have kind of been arm-twisted,” Sharman said, adding that the British government has been trying to combat the use of its territories for tax-free shell companies that are “one of the avenues for large-scale financial crime.”
If the bills are approved, the registry is expected to be created by June 30. It would allow U.K. authorities to obtain information within 24 hours of requesting it, according to a statement emailed to CBS News from the Cayman Islands’ Ministry for Financial Services. The Ministry noted that the Cayman Islands are currently able to share certain information with agencies from more than 100 countries, including the United States’ Internal Revenue Service.
However, Ronen Palan, a professor of international politics at the City University of London, said the current process for authorities who request information is often slow and opaque.
“Cayman is a financial center that operates largely as a registration center for companies, (and) the active goal is tax avoidance,” Palan said.
The most recent statistics published by the Cayman Islands’ government lists 98,838 active companies registered, nearly two companies for every one resident of the country. A 2013 report by consumer watchdog the U.S. Public Interest Research Group found 18,000 companies were registered at just one five-story building on the Cayman Islands.
The calls for greater regulations and registries came after a series of leaks in the last few years showed firms in several offshore tax havens being used for apparent fraud, tax evasion and to subvert international sanctions. On Feb. 10, two partners at the Panamanian law firm Mossack Fonseca were arrested in relation to the leak in 2015 of the “Panama Papers,” which revealed information about more than 200,000 offshore companies, linking some to dictators, arms dealers and other illicit enterprises.
Sharman, the Cambridge professor, said that even if the Cayman Islands create a more streamlined registry, there’s little evidence authorities will actually use it. He cited a registry previously created on the British island territory of Jersey, saying researchers have not been able to study it.
“The British government has decided that these central registries are wonderful and will solve many of the world’s problems when it comes to kleptocracy, but it has no track record,” Sharman said. “One question is what information is there? If there is unreliable information, than it isn’t very useful.”