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Cayman Islands: Financial Services

Volume 491: debated on Thursday 30 April 2009

To ask the Secretary of State for Foreign and Commonwealth Affairs what consideration he has given to directing the Governor of the Cayman Islands to comply with the Organisation for Economic Co-operation and Development’s requirements on tax disclosure, financial regulation and oversight; and if he will make a statement. (271787)

[holding answer 28 April 2009]: In the Cayman Islands, finance is a constitutionally devolved competence, which gives primary responsibility for legislation and regulation to the Government of the Cayman Islands.

The Government continually underline to all territories the importance of meeting international standards on information exchange, in the context of both taxation and regulatory matters. At the overseas territories consultative council meeting in November last year territories were encouraged to make progress towards the Organisation for Economic Co-operation and Development (OECD) standards on tax transparency. The Governor repeated this message prior to the G20 Summit.

The Cayman Islands was one of the first jurisdictions to commit to the OECD international standard on exchange of information in 2000. The Leader of Government Business in the Cayman Islands re-committed to this standard in March 2009 and Cayman has signed eight tax information exchange agreements to date. Last year it introduced a unilateral legal mechanism for the provision of tax information assistance pursuant to which they have extended assistance to a further 12 other jurisdictions. This approach is currently being considered by the OECD with a view to confirming whether it meets their standard. The Cayman Islands, along with other relevant overseas territories, is also compliant with the requirements of the EU savings tax directive.

My right hon. Friend the Prime Minister in his letter to the Government of the Cayman Islands following the summit stressed the need for them to at least match the global pace on the exchange of tax information and urged them to meet the OECD standard in time for the UN General Assembly meetings in September. He has also encouraged them to meet any new international standards which may emerge. The Government will continue to work with all the overseas territories to support them in reaching these targets.

To ask the Secretary of State for Foreign and Commonwealth Affairs for what reason responsibility for (a) financial regulation and oversight and (b) compliance with (i) obligations imposed by the Organisation for Economic Co-operation and Development and (ii) other treaty obligations relating to financial regulation and oversight and disclosure are matters reserved to the Governor of the Cayman Islands. (271788)

[holding answer 28 April 2009]: Financial regulation and oversight are not matters reserved to the Governor of the Cayman Islands. Responsibility has been devolved to the Cayman Islands Government.

Compliance with treaty obligations extending to the Cayman Islands, including those relating to financial matters, is primarily the responsibility of the territory Government, and we expect them to comply fully with those obligations. However, the UK is ultimately responsible for the territories’ compliance with treaty obligations under international law.

Under the 1972 (current) Cayman Islands Constitution the Governor is the Queen’s representative in the territory and has responsibility for external relations and, therefore, the territory Ministers have no power or authority to enter into a binding international commitment unless authorised by entrustment from the Secretary of State for Foreign and Commonwealth Affairs.