Things fall apart: Ex-‘best friends’ UK and Cayman Islands in fresh fight
02 Oct 2018

There’s been a new twist to the rather amusing relationship between the United Kingdom and its former chum the Cayman Islands.

In a recent development, British financial police chief Donald Toon expressed frustration with Cayman, saying that his National Crime Agency (NCA) was “asking for information we don’t get” and that Cayman had not cooperated when he had asked them for information on who owned certain firms connected to a number of NCA investigations.

And while his officers usually found the British Overseas Territories (OT) to be ‘helpful,’ there were issues with Cayman, he added.

“We can generally get from them clear, unambiguous beneficial ownership information but we are having a difficulty with Cayman,” he said, adding that Cayman’s government is “entirely aware of the UK concerns.”

For some, it may be understandable why Toon is upset.

As Director or Prosperity at the NCA, he is tasked with the unenviable role of busting London’s rampant money laundering networks and recovering the assets of wealthy crooks, many of whom are believed to have strong ties with or hiding in offshore jurisdictions like the Cayman Islands.

Government officials estimate that billions are laundered in the British banking system annually, and so partnerships and assistance from police in such places come in handy.

And repeatedly asking for vital information and not getting any must be frustrating.

Trouble erupts (again)

This, of course, is not the first fight between the two jurisdictions.

Some may recall that the rift can be traced back to May this year when British MPs finally agreed that the OTs should be compelled to implement public registers of beneficial ownership, as an amendment to the Sanctions and Anti-Money Laundering Bill.

Cayman hit back, saying it was “deeply aggrieved” over the plans and that it was considering taking legal action against the UK.

Love goes out the window

What is interesting about Toon’s outburst is that it reflects the degree to which the relationship has broken down, especially considering that these two states were at one time – in fact not too long ago – known to be great friends.

Better put, they were ‘loyal’ friends.

For a long time, the UK resisted pressure from anti-corruption groups, British MPs, Members of the European Parliament and many others to compel Cayman and its other OTs to implement public data registers.

The registers were to state who the real or beneficial owners of firms were, to help combat illegal corporate secrecy and other crimes like money laundering.

Britain gave all sorts of reasons why it would not force Cayman to implement, and Cayman, with the firm backing of the UK, dug its heels in, refusing to implement the registers it detested.

Not even huge scandals like the Panama Papers could shake the UK’s loyalty to Cayman. The scandals, as one can imagine, left Britain rather red-faced over its OTs alleged links to shady deals, but it remained unfased in its support for Cayman

In fact, so great was the friendship that it was hard to imagine that there would be a day when little Cayman would give the mighty UK a big fat ‘No!’ for simple information requests.

What is also interesting about Toon’s attack, of course, is that he has gone public about the bad blood between his government and the Cayman Islands.

Cayman strikes back

KYC360, keen to get to the bottom of this story, decided to contact Cayman to find out why it was behaving so badly, if not embarrassingly, towards its former friend.

A Cayman Islands spokesman, who seemed very unimpressed with the UK, explained that Cayman had not refused to help the UK at all – in fact, there had been only one case in May this year, when a legal issued affected Cayman’s response to the NCA. However, once the issue was resolved, the information was provided to the NCA.

“There is absolutely no merit to Mr. Toon’s allegation. His complaint is a gross misrepresentation of a single situation and is no basis on which to accuse the Cayman Islands of being uncooperative,” Cayman said in a statement.

Cayman also dug out statements where the UK had actually thanked and praised it for its cooperation.

“The NCA’s recent criticism of Cayman is surprising, bearing in mind that the NCA itself has written to thank the Cayman Islands for its ‘continuing and excellent support’ in relation to an international, high-profile investigation into money laundering,” Cayman said.

Who’s bad?

So, who’s the ‘bad boy’ here? Was it just one case only where the Cayman did not send information immediately because of a legal reason, as it claimed, or was it several instances, as the UK’s NCA alleged?

When KYC360 asked, Cayman stood by its claim that it was just one incident and that what the NCA’s Toon was saying was incorrect, meanwhile the NCA did not return phone calls or emails when asked to comment.

Amid the exchange of unpleasantries between the NCA and Cayman, the UK’s Foreign and Commonwealth Office (FCO) also spoke regarding the matter, saying that Cayman’s decision to withdraw from a key data exchange deal with the UK – called the Exchange of Notes (EoN) on Company Beneficial Ownership – as well as the withdrawal of its Royal Cayman Islands Police Service (RCIPS) from being the competent authority for dealing with beneficial ownership requests ‘makes cooperation on serious organised crime more difficult.’

Cayman responded insisting that it is still cooperating with the UK despite its stance on the EoN.

Regarding withdrawing the RCIPS as the competent authority, it said its appointment as a competent authority had only been a temporary measure, and hence was set to be withdrawn at some stage:

“Under the EoN, the Cayman Islands specified the Financial Crimes Unit of the RCIPS as the ‘designated point of contact’ for requests. This distinction in functions was determined by the UK in the crafting of the EoN,” Cayman said in a statement, “between August 2017 and July 2018, the Cayman Islands took the additional step of delegating certain powers of the beneficial ownership competent authority to the Financial Crimes Unit to facilitate a transition period while the platform became fully operational.

“ At the end of the transition period on June 30th 2018, the additional powers delegated to the Financial Crimes Unit were no longer necessary and were consequently revoked.”

Cayman also wrote: “It is correct that the Foreign and Commonwealth Office (FCO) and the Cayman Islands Government continue to have a difference of opinion on parts of the agreement termed the ‘Exchange of Notes’, but it is disingenuous for the FCO to say that the Cayman Islands is not cooperating with the UK with regards to investigating serious crimes.”

Deep split … but not divorced

Whatever the case, and regardless of who is being truthful in this mudslinging contest, the demise of the special friendship between the UK and Cayman is turning out to be an interesting development in the field of financial crime, for both the cops and the crooks.

And with the NCA boss taking their rift public, it could get even messier.

The split could also turn out to be hugely entertaining for some who were never impressed with the friendship in the first place.

For the time being, though, the UK, despite expressing disdain, seems keen to patch things up, perhaps because it realises that it does need this ‘bad’ friend after all.

After moaning about Cayman, the FCO said: “We are working with the Cayman government to resolve these issues constructively, including through discussions between the FCO Minister for the Overseas Territories Lord Ahmad and the Premier.”

Irene Madongo

Read more:

Cayman islands accuses UK of “apparent double standard” on registers, considers legal action

Confessions of a compliance officer: Do you trust overseas colleagues’ KYC work? Guess what …

Money laundering at Danske Bank: Lessons for financial crime professionals (Part 2)

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