Cayman Islands in spotlight ahead of Florida senate elections, as new anti-money laundering rules loom

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Governor Rick scott. Photo: Meredyth Hope Hall/Wikimedia

By Youri Kemp
Caribbean News Now associate editor
youri@caribbeannewsnow.com

GEORGE TOWN, Cayman Islands — The Cayman Islands, the much maligned offshore financial services centre, is in the spotlight again as outgoing Florida governor and US Senate hopeful, Republican Rick Scott, has been linked to the territory along with his wife in a series of hedge fund investments exceeding US$60 million in value, with earnings from those investments totalling some US$2.9 million alone.

According to the financial disclosure Scott filed last month as a US Senate candidate, the 125-page statement included details of Scott’s blind trust, managed by a New York trustee who’s a former business associate of the governor.

Of the 23 individual investments the Scott’s listed as linked to the Cayman Islands, six are in the governor’s name and 17 are in his wife’s name.

The July 27 filing is the first time in his nearly eight years as governor that Scott was required to disclose his wife’s financial holdings.

Scott, who has an estimated net worth of over US$250 million, claims that it was a mere coincidence that this blind trust had set up this arrangement in the Cayman Islands and that he had no knowledge of the transactions being conducted on his behalf.

The Cayman Islands has not yet overcome the negative stigma of being a tax haven, facilitating money laundering and tax avoidance of wealthy Americans and Europeans.

In fact, just within the last year other Republican party officials have been linked to fortunes in the Cayman Islands.

Federal records detail how President Trump’s Commerce Secretary Wilbur Ross, Securities and Exchange Commission chairman Jay Clayton and Federal Reserve board appointee Randal Quarles held parts of their personal fortunes in investments based in the Cayman Islands, which are not necessarily required to adhere to US domestic financial regulations.

The family yacht of Education Secretary Betsy DeVos, an heiress to the Amway fortune, is registered in the Cayman Islands and carries the Cayman flag. According to federal records reported in Newsweek, the yacht is owned by RDV International Marine, which is an affiliate of the company that controls the DeVos family’s fortune.

During the 2012 US presidential campaign, former Massachusetts governor and Republican candidate, Mitt Romney, had also came under intense scrutiny for his substantial portfolio tucked away in the Cayman Islands.

Romney, who is also a mega financier and founder of Bain Capital, had several accounts in the Cayman Islands – something that was said to be normal practice for a company so large, so multinational and so diverse that it was a regular week in the life of Bain.

The image of the Cayman Islands as a tax haven still persists to this day in Europe as well. In December 2017, the territory was placed on a tax haven “grey list” of countries that the European Union (EU) uses to watch out for and monitor with regard to tax-avoidance schemes.

Just recently, it was also reported in local media that a fraudulent investment company purportedly based there was “scamming” potential investors.

The company was not named but is reported to have been mainly targeting investors in New Zealand.

The Cayman Islands Financial Crimes Unit said it was aware of several investors who have lost money to this reported scam, in one case as much as US$20,000.

The Sanctions and Anti-Money Laundering Act 2018, passed by the British parliament earlier this year, sets out to curb most of the activities in the British Overseas Territories (BOTs) – of which the Cayman Islands is one – as they relate to money laundering and tax avoidance.

BOTs, including Anguilla, Bermuda, British Virgin Islands, Montserrat and the Turks and Caicos Islands, along with the Cayman Islands, are now required to set up public ownership registers by the end of 2020. Failure to introduce the required registers will risk having them imposed by the UK government by means of an Order in Council, in addition to other possible sanctions imposed by the EU or associated regulatory or international oversight bodies.

However, the Anti-Money Laundering Act does not apply to the crown dependencies of Jersey, Guernsey and the Isle of Man, where the UK parliament does not have legal power to impose its will.

The Act is designed to allow revenue authorities in the UK to collect billions in taxes from UK businesses and estimates around 50,000 people are engaged in foreign-based tax-avoidance schemes through the various offshore centres in the Caribbean such as the Cayman Islands.

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