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Shining a Light on Cayman as a Hedge Fund Jurisdiction of Choice

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After working diligently to overcome the perception of being a tax haven with lower anti-money laundering standards, the Cayman Islands have emerged as the hedge fund jurisdiction of choice based on tax neutrality, stability, integrity and professional infrastructure, according to panelists at the recent ACAMS Grand Cayman Symposium.

During the June 13 discussion, Kendell Pierre, MUFG Investor Services Chief Compliance Officer, and Christine Ballantyne-Drewe, Senior Counsel, Walkers, described working with funds in Cayman, including global perception, regulatory environment and compliance objectives. They noted that Cayman has unique, deep professional services and regulatory infrastructure vital to funds’ success.

“Compliance is not just Anti-Money Laundering (AML),” Pierre said. “It’s a comprehensive program that helps institutions and their employees conduct operations and activities ethically, with the highest level of integrity, and abide by legal, regulatory, and other internal requirements.”

While fund administrators in Cayman face common challenges—resource limitations, navigating new products and services and the evolving geopolitical/macroeconomic landscape—the panelists noted that significant reputational strides have been made. In the past three decades of servicing the funds industry, the jurisdiction has grown through innovation and forward-looking policies that serve as models in other jurisdictions.

“Cayman is recognized internationally for its efforts to adhere to international regulatory standards and plays a leadership role in the offshore arena on international regulatory issues,” Pierre said. “In the area of AML, the jurisdiction’s regulatory regime is well known for surpassing many of the world’s top international financial centers.”

In fact, Cayman is home to many global financial services operations seeking the certainty of a well-respected judicial system, and a strong legal and regulatory framework. Cayman’s robust registration process for launching investment funds allows fund managers to get their offshore fund and management vehicles up and running quickly. The wide range of service providers—ranging from experts in law, accountancy, corporate services and investments expertise—help to reinforce message that the Cayman Islands combats tax evasion with legislation, regulation, and automatic tax information sharing arrangements that uphold the highest international standards for transparency and cross-border cooperation.

During the discussion, Pierre noted that Cayman already has resolved 62 of 63 recommendations made by a Financial Action Task Force (FATF) inspection in 2021. The FATF has since reported its satisfaction with the remaining recommendation and pending an onsite visit, a final decision will be made on Cayman’s delisting in October.

All of that work “demonstrates why we are the jurisdiction of choice,” Pierre said.