Offshore Banking

For almost four decades the Cayman Islands has enjoyed unprecedented economic growth as a direct result of its financial services industry. While the tourist sector continues to play a very important part in the domestic economy, Cayman’s real wealth has been generated by its offshore services and tax neutral status. The growth of the country’s financial golden goose started, so legend has it, in 1794.

In the swashbuckling days of pirates and tall ships, it is said that a convoy of produce laden ships headed to England from Jamaica ran aground on the reef located off the east coast of Grand Cayman. The tale of the “Wreck of the Ten Sails” suggests that as this maritime tragedy struck, the people of East End came to the rescue in their small crafts and saved the lives of some 400 men who were aboard the merchant vessels. In the wake of their heroic feat, the story has it that, as a reward the reigning British monarch, King George III, awarded the Cayman Islands its tax free status.

Although Cayman’s first commercial bank, Barclays, opened its doors in 1953, it wasn’t until the 1960s that the tax free status was put to the test. Having maintained its position as a colony of the British Empire when the rest of the Caribbean, in particular Jamaica (through which Cayman had been administered), sought independence, the islands retained English common law which combined with its tax neutral position gave the jurisdiction an opportunity to capitalise on the growing development and liberalisation of international finance in the post-war world.

In 1960 the Cayman Islands company registry was established under the Companies Law and the second commercial bank, The Royal Bank of Canada, was opened in 1963. When Cable and Wireless brought the miracle of telecommunications to the islands in 1965, coupled with the enactment of The Banks and Trust Companies Regulations Law in 1966, the stage was set to change Cayman from a maritime economy to the world’s fifth largest financial services sector. With the mosquitoes under control and the diversification of the finance industry taking shape, the economy began growing and continued to build throughout the 1970s. The subsequent introduction of the Insurance Law in 1979 and the Mutual Fund Law in 1993 solidified Cayman as a leading financial services centre.