Opening a Cayman Islands Bank Account
A guide to opening and how to apply for a bank account in the Cayman Islands
With no direct taxation, The Cayman Islands are a thriving offshore banking & finance centre. The Cayman Islands financial services industry developed, along a path similar to that in other offshore centres, on the strength of private banking. While meeting the needs of high net worth individuals is still an important aspect of the industry, recently the focus has moved very much towards institutional business.
The Cayman Islands offer a full range of offshore financial services and products, including: asset management and protection; commercial banking, company formation, investment management; trust & fund administration; private banking; shipping & aircraft registry with financing support services.
Outstanding Financial Stability
Both institutions and individual investors alike are assured that establishing a bank or placing assets in Cayman, will afford them the best opportunity to maximize the potential of their assets conveniently with the added value of confidentiality, unparalleled professionalism and efficient regulation. This assurance is as a result of the high ethical standards in government and among financial service providers in addition to clear and fair laws and regulations (applied by a competent judiciary based on the English common law system).
Advantages of Opening a Cayman Islands Bank Account
- No capital gains tax, Corporation Tax, withholding tax, property tax, payroll tax, or income tax payable by employees.
- Absence of exchange control, allowing free transfer of funds in and out of the Islands, in any currency, with equal freedom to open and maintain accounts in any currency.
- No reserve asset requirements.
- Statutory confidentiality of client information.
- Competitiveness in the Euro currency markets.
Statutory confidentiality of client information is provided by the Confidential Relationships Law, though it should be noted that the Governor in Council can authorize disclosure of information where there is evidence of criminality. This can apply to transactions effected outside Cayman if, had they taken place within the Islands, they would have constituted a criminal offense. In addition, in 1990 the Mutual Legal Assistance Treaty with the United States Government came into effect. The treaty provides for the exchange of information required in the investigation of a range of criminal activity. It excludes tax matters. The "Central Authority" for the treaty in the Cayman Islands is the Chief Justice or his designate.
Open a Cayman Islands Bank Account Online
While many of the banks in the Cayman Islands are involved in the movement of billions of dollars around the world in business operations, the Islands' major banks also offer opportunities for investors on a smaller scale to take advantage of Caymans tax-free climate protected by a confidentiality law which ensures privacy for all reputable transactions. This opportunity is taken up by many overseas investors who see a Cayman Islands bank account as a secure and discreet place for the deposit of funds which can earn tax free interest. There are no exchange control or reporting requirements in the Islands, and funds may be converted into other currencies and moved in an out of the Islands freely.
The major banks in Grand Cayman will open an account for a new depositor on receipt of a reference from the depositor's home banker, and for obvious reasons they will not accept large sums in cash. Funds may be deposited in US dollars or other currencies by arrangement, and can be delivered by cheque which can take up to 17 business days to clear and by banker's draft or by telegraphic transfer. Checking or savings accounts may be opened, but the most popular method is the fixed-interest or on time deposit (usually for a minimum of US$5,000) paying the interest quoted on receipt and for an agreed time. Interest rates on the various currencies may vary daily, and schedules of them may be obtained from the major banks.
Resolute measures have been taken by the Cayman Islands Government in recent years to protect and enhance the reputation of the islands as a base for offshore financial operations. This action includes the signing of a Mutual Legal Assistance Treaty with the United Kingdom and the United States aimed at narcotics-related and other crime, though specifically excluding tax offenses, which of course do not exist in the Cayman Islands. The positive outcome of this government policy has been the continued steady rise in the number and quality of banks seeking a license to have a global presence within the Cayman Islands.
THE CAYMAN ISLANDS ARE A REPUTABLE OFFSHORE FINANCE CENTRE
The Cayman Islands is recognised as one of the top 10 international financial centres in the world, with over 40 of the top 50 banks holding licences here. Inter-bank bookings between onshore banks and their Cayman Islands branches or subsidiaries account for more than 80 percent of the US$1 trillion on deposit and booked through the Cayman Islands, representing a low risk profile for money laundering. This statistic reflects the recognition of the Islands' stature in international finance as well as its position as one of the leading centres of the global Euro-currency market. Banks licensed in the Islands represent 54 countries. Some of the reasons influencing their decision include the Cayman Islands strong reputation for sensible regulation, professionalism, confidentiality, tax advantages, asset protection, political stability, good infrastructure and geographical location.
There are currently 295 banks and trust companies licensed by the Cayman Islands Government as of end of third quarter 2006 to carry on banking & trust business in the Cayman Islands. Around 19 banks have the Category "A" licenses which allow them to carry on business with residents and non-residents of the Islands. The remaining 276 companies hold Category "B" licenses and are for the most part restricted to offshore transactions with non-residents.
Government policy is to protect the Cayman Islands status as a reputable international financial centre through strict examination procedures for new licenses and close supervision of the business of existing licensees.
The main government controls are..
- The appointment of a professional Inspector of Financial Services, who leads a banking supervision team which examines all applications for licenses, makes recommendations to the Governor in Council -- the Islands' "Cabinet", which must approve all bank licenses -- and closely monitors the activities of licensed banks.
- Strict insistence on the submission of regular returns and compliance with all Government requirements, including an external audit by approved local auditors.
- The power to revoke a license if it is found that the licensee is carrying on business in a manner detrimental to the public's interest or to the interests of depositors and other creditors.
A number of features have enabled the Islands to attract and retain both wealthy individuals, businesses and institutions. Some are obvious and frequently cited: political and economic stability; a business-oriented government; a tried and tested legal regime and an effective regulatory framework which meets international standards but is not burdensome or cost-prohibitive. Other features are more subtle.
Notably; they include an infrastructure of professional service providers with considerable international experience and expertise across a number of disciplines whose work ethic and commitment is just as strong as the best of their onshore counterparts. Particular attractions for institutional clients are the absence of burdensome regulation, the user-friendly legal regime and the tried and tested nature of the transactions and structures which means that transactions can be completed in much shorter timescales than would be possible onshore and at a significantly lower cost.
Cayman vehicles are frequently used by large corporate groups and institutions to structure transactions because of the tax neutral and proportionate regulatory environment available. Whether those vehicles facilitate legitimate tax deferral on foreign source trading income, serve a treasury function, hold intangibles or enable an international joint venture, they provide true economic benefits for the shareholders and other stakeholders of those onshore groups and institutions.
The Cayman Islands is a recognized centre of excellence in three specific areas of institutional business: investment funds, captive insurance and structured finance. A true heavyweight in the investment funds arena they have carved out a particular niche in respect of hedge funds and other alternative investment funds such as private equity and real estate. Some 60 per cent of the world's offshore hedge funds are domiciled here with recent figures indicating that, on a worldwide basis, the hedge funds industry is now a trillion dollar industry. Early in 2004, the number of regulated investment funds hit an astonishing 5,000 and there appears to be no let-up.
Why has the Cayman Islands been so successful in attracting hedge funds? A key feature is a balanced regulatory framework which recognizes that purchasers of hedge funds are highly sophisticated investors. Also relevant to Cayman's appeal to fund managers specializing in alternative investments is the absence of unnecessary licensing provisions and significant flexibility with regard to investment objectives, risks, service providers and other commercial matters.
The United States remains the single most important source of business in this area but other regions of the world, particularly Europe and the Far East, are increasingly important. Frequently, it is the fund manager's onshore legal counsel who will direct their client to the Cayman Islands. Structuring flexibility - whether stand-alone, master feeder, side by side, fund of funds or protected cell company is frequently an important factor.
Cayman is also regarded as a leading offshore domicile for captive insurance companies, particularly those writing hospital and medical malpractice cover. The objective of a captive is to provide the same if not better insurance cover at a lower cost because of the avoidance of the expenses and margin that the commercial insurer builds into the premium. Whatever captive structure is used - single parent, association, group, rent-a-captive or Protected Cell Company - Cayman is ideally suited for this sector.
The expertise of Cayman professionals is key: insurance managers who understand the industry and can react quickly to the needs of their clients; and law and accounting firms that have niche insurance specialization. In addition, there is a modem straightforward insurance law, user-friendly regulation (including low minimum capitalization requirements) and an accessible regulator. As at 30 June 2004 there were 660 captive insurance companies established in the Cayman Islands and it is likely that this sector will continue to thrive, even with a softening insurance market.
Structured finance has been and remains an enormous growth area in the global financial services industry, providing issuers with cheaper and more efficient funding combined with greater balance sheet flexibility and investors with a broad selection of fixed income investment alternatives with a high credit rating and stable cash flows combined with protection against the bankruptcy of the issuer. Cayman is acknowledged to be the largest offshore centre for structured debt transactions, whether that be simple euro paper issues, repackaging, aircraft financing or the more complex securitisations of mortgages, credit card receivables, car loans, music royalties and the like.
The Cayman piece of any structured finance transaction will be the establishment of a bankruptcy remote vehicle which owns the assets, the subject of the transaction and the provision of service providers to the entity (principally, the directors and the trust company which will own the shares in the entity) to ensure that the integrity of the structure is not tainted in any way. The integrity of the structure is of paramount importance. The vehicle must have its own voice in the relevant transactions, hence the importance of experienced Cayman professional directors who have a high level of expertise in structured finance.
Many of the features that have contributed to the development of the investment funds business in the Cayman Islands equally apply to structured finance. In addition, the absence of withholding tax and exchange controls, a creditor friendly legal system and the ability to readily obtain an investment grade rating, are particularly significant. Challenges clearly lie ahead as a result of onshore developments post-Enron but structured finance in the Cayman Islands nevertheless remains in good health.
The outlook for Cayman's institutional business and financial services industry generally, is very good. There is no reason why investment funds, structured finance and captive insurance in particular should not continue to be significant contributors to Cayman's expanding financial services industry.
Source: Offshore Library & cayman.com.ky