Alden McLaughlin - Premier of the Cayman Islands HARDtalk

be no object in dealing with the floods. 24 serious flood warnings

are in place. Now it is time for Hard Talk. Welcome to Hard Talk. I

am Stephen Sackur. Sun, sand and sea. The Cayman Islands is one of

the most tax havens. That is now the US is putting pressure on the Cayman

Islands. My guess today is Alden McLaughlin. -- guest. Is the Cayman

Islands about to lose its allure? Alden McLaughlin, welcome to Hard

Talk. Would you agree that you oversee one of the strangest and

most unbalanced micro- economies in the world? I would not say the

strangest. We have had a success story. Why would you say that? We

have, from a hard scrabble existence. Is used to be only able

to work in the land or the sea. You have nearly 12,000 mutual funds that

called the Cayman Islands their home. You have fewer than 62,000

people. I think it is strange. I think it is bizarre. I would never

use those words. It is due to the vision of the people of our country

to building something new. I think it is testament to people wanting to

pay as little tax as possible. I wouldn't say that that wasn't the

genesis of it. That is not the case now. We have had an immense amount

of change over the last 20 years, the whole world. There aren't real

places to dodge tax. You must be aware of the building that you have

that President Obama mentioned recently. Is it true that the right

18,000 businesses registered to that building? It is true that they are

registered there. How many people physically work there out of that

building? They might not have a physical presence. It is a law

office. They operate registered companies. I want to talk about what

President Obama said. He said it is either the biggest building on Earth

or it is the biggest tax scam. It is neither. There is a place in

Delaware where there are 255,000 companies registered. We have on

record all the registered owners. The difference with us is that we

have 33 bilateral tax information exchange arrangements with all the

major trading nations in the world. That includes the United States and

the United Kingdom. We will get to that later. We don't want to lose

the discussion we are having about the reality of the Cayman Islands.

You can talk about Delaware. It is true that there are tax evasion, tax

avoidance, call it what you will. Let me just get back to you. You

have such a small territory. There are fewer than 65,000 people. The

danger is that it is being used by powerful forces beyond your

control. You cannot control them or regulate them. You cannot stop them

in a crisis. I do not agree. We are an open jurisdiction. 33 countries

have signed on to this bilateral tax agreement. We have been grilled and

examined and scrutinised by all the agencies. The US Department of

Justice, the OECD, many bodies, they all say that we are one of the best

systems in the world. We have strong regulations on laundering. We are in

many respects ahead of the United Kingdom, especially in terms of how

beneficial ownership is concerned. We have all the records. The city of

London cannot say that. I will get to that in a minute. You say that

you and -- are not a tax haven. Clearly you are. People put their

business there because they can minimise the global tax that they

pay. They can do that East on what happens in your territory. You think

that is ethically right? It is not right for people not to pay tax in

the area where they are from. What is missing from this dialogue is an

appreciation that the Cayman Islands has never had direct taxation. The

benefit to business and Cayman Islands is that we are tax neutral.

Any tax liable in the home jurisdiction is paid on -- in the

jurisdiction. We have a framework where no one who wants to hide from

authorities about paying tax is going to come to the Cayman Islands.

We will give their home jurisdiction the information. The political

climate has changed. Many wealthy individuals and large businesses are

minimising their tax that they pay. They are using financial vehicles

based on your territory. I want to talk you about what a leading

economist said. They said that we need to change international law so

that channelling funds through these offshore jurisdictions, like yours,

it is no longer possible. Due agree that that should happen? -- do you.

That. The lifeblood of your country will be stopped. People do not go to

your country because of the sun and the sea and surf. That is a

misconception. Let me give you an example. Let's say you have a

factory in the UK that manufactures cars. The factory goes to the bank

in London to borrow money. Much of that money is raised in an

international financial centre. We have a tax neutral platform. One

we're talking about huge sums of money, it allows participants from

all over the world to be able to pull the money into one of these

funds. -- pool. You can put it in those terms, but with such a small

population, you have assets worth $1.5 trillion. It makes it look like

the responsible economics in Iceland have been a tea party. Let's look at

the scandals and scams. It was not offshore. It was Enron. In Iceland,

it grew out of any proportion to the economy. Let's not speculate. Let's

talk about Enron. Let's talk about last week and the Royal Bank of

Scotland. One of the big mistakes is targeting and scapegoating the

international financial centres. Cayman Islands is better regulated

than many onshore jurisdictions. You keep telling me that you are well

regulated. You are listed as in the top five most secretive financial

centres. That is by a group that spent all their time looking at

transparency and accountability. They do not like what they see. I

will frame from saying anything negative by them. -- refrain.

The Guildford apartment just as in the US says. Those of the report

that matter. You are happy to say that US reports matter. The

anti-crime programme looked at the Cayman Islands. They lifted its

commitments to sorting out financial wrongdoing. -- looked at. An

official asked, how many convictions for money-laundering have there been

in the Cayman Islands in the past six years? Since 2006, he could only

come up with six, just six convictions. Does it suggest that

your commitment to sorting out financial wrongdoing is very deep?

It is very deep. I am not sure when that statement was made, I am not

sure who the individual was. It was from the spring of 213, less than

one year ago. -- 2013. Will turn to the force says about the Cayman

Islands. They did a peer-review and cannot with 49 recommendations. We

are in the second level, along with the UK, US, Germany and France. When

you dig into the report, you find that actually, we are further rate

had certainly when it comes to collection of information, and the

ability to say, who are the beneficial owners of various

entities in the Cayman Islands. So you are now committing to absolute

revelation that all the beneficial owners of assets in Caymans, how

will the complicated the investment vehicles we see in your territory,

you are going to ensure that the beneficial owners, the people who

really knows assets, are rated to fight? I said this the show, we have

had in place requiring that records in regards to beneficial ownership

in Cayman Islands is kept for ten years. Is it published? Is it

accessible to people outside world who want to know all those

investment vehicles on inside your country, will be able to find out? I

do not know of any country wear it does happen like that. We are moving

in that direction in the UK. We will identify beneficial owners of

discretionary trusts. The Cayman Islands muster the same. Will you?

Let me put it this way. He wants an answer. David Cameron monster that

she will put your house in order. -- wants to know that you will put your

house in order. They want to know that you will take the steps. Arrow

house is in better order than the UK in respect to beneficial ownership.

We have had the legislation in place that records had to be kept for ten

years. We are in dialogue with the UK about the move to a public

registry, the proposal to move to a public registry. We have just

undertaken in the consultation process. We have extended for

another month. Her Majesty 's Treasury wishes to come and look at

what has happened and talked what about the way forward. Let me put it

this way, as the premiere of the Cayman Islands, I have no

difficulty, and the government has no difficulty, in complying with the

international standards. If the international standards are that

they ought to be public registers for these matters, we are more than

happy to comply. We have led the charge as part of the OECD global

Forum. But you are saying that you will not be a leader? The former

chairman of the Caymans military authority has warned that if you

provide a public registry of beneficial owners of these vehicles

and discretionary trust, he could make the Cayman Islands

uncompetitive. Are you worried that you could be about to lose what has

major successful? We have faced challenges were several years.

Transparency has become more and more the culture. You have been

under enormous pressure. We have led the charge in changing the

standards. He reason other little bit but I think is important. As we

have become more transparent, as regulation has improved, our

business has improved. Legitimate business wants to be in

jurisdictions that are well regulated and transparent. That is a

ringing declaration. Why don't we make one more right now, thus far,

you have many great deal of it, you have signed deals with the UK and US

that require automatic exchange on bank accounts, financial accounts,

held in the Cayman Islands. There are 33 other jurisdictions. For the

other 33, it is not automatic. You wait for a request. Everybody who

has studied these matters say it is only when it is automatic that she

really got the transparency necessary. AFL that will be the new

global standard. When you sign these deals with other nations, why are

you not putting in that clause? We mirror the other holy city countries

that are signing up to these. These are standard fare. When the global

standard moves, are standard fare. When the global

have made it clear. George Osborne said, if you want to tackle tax

evasion, this information has to be provided automatically. With Russia,

China, other key emerging markets where there are rich individuals,

why not insure that you automatically feed that information

back to the host government? The bigger question is, why aren't all

the other big countries enact their standard? That is where the standard

is moving. We have no objection to doing this. The point able to make

use, this thing called regular Tory arbitrageurs. When one group of

nations tighten the rules and make regulation tougher. Others do not.

What you think happens to business? It migrates to way there is less

regulation. So you are worried that she will lose out to compatibles?

This is the point I made. Finance is global. This is not just about your

competitive place, it is about morals and ethics. Shouldn't you be

sending a signal that this kind of tax evasion practice we have seen

for so long, has to end. Are you seriously suggesting that a nation

of 60,000 people ought to be the moral arbiter for the world? Iron

suggesting that a nation that posts $1.5 trillion of assets can send a

strong signal. What we need is to have the same signal being repeated

right across the world, across the G8 nations, the G 20 nations, and

the US. A final thought, this is about politics. You are the Premier,

you still have to bow to the rule of Britain. David Cameron is putting

pressure on you on everything from austerity programmes to demand and

that you come up with tougher regulation of the tax haven. Are you

getting sick of being told what to do by Britain? No, actually. You are

quite happy? The relationship we have is quite good. There are

tensions from time to time, there are tensions in every relationship.

We value our constitutional link with the UK. While there may be one

or two match to waive the independence flag, by and large, the

country did not want independence. When you set the Cayman Islands has

been scapegoated, you would not thinking of the British government?

I was not, I was not pointing at any particular country. The perception

that has been put forward that the Cayman Islands a rate tax haven in

which resides billions of dollars that nobody knows the ownership of,

that it is a haven for tax cheats and a launderers, that is what I am

putting about. Talking about it that way, while disregarding. So you are

committed to remaining a financial centre? Yes. We have two and they.

Thank you. It is not good news. There is more

unwelcome rain on the way and some severe wind gusts as well. A look of

it satellite picture for those of us overnight, we will be keeping in

close eye on the system. This developing area of cloud has a

deepening low pressure system which is set to bring some nasty

conditions to many of us. Over the next couple of