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Cayman Islands - Banking
The jurisdictions offering these licenses become known as offshore financial centres regardless of their physical place in the world. Andorra, Luxembourg and Switzerland are landlocked nations, but their tax arrangements mean they are referred to in the same terms as the Isle of Man, the Channel Islands and the Cayman Islands.
These countries and territories are also referred to as tax havens, because little or no tax is charged on the wealth deposited there. Some individuals and organisations have used these offshore accounts to hide taxable wealth from their domestic government agencies and even launder the gains of criminal activity.
However, offshore investments are changing. A number of initiatives to tackle the financing of terrorism, money laundering and related crime have been undertaken on an impressive global scale. These include the financial action task force’s blacklist of Non-Cooperative Countries or Territories (NCCT). Many countries have now signed agreements to share bank account information with the tax authorities of the account holder’s resident nation.
Furthermore, government authorities may legally use stolen documents to investigate and prosecute cases of tax evasion. Secret information has been handed over to the press and governments on a number of recent occasions. In 2016, 11.5 million documents now known as the Panama Papers were electronically leaked from the Panamanian law firm and corporate services provider Mossack Fonseca, allowing the international media to discuss in detail the offshore wealth arrangements of politicians, celebrities and other notable people. A year later, a second leak of 13.4 million electronic documents from the offshore service providers Appleby, Estera and Asiaciti Trust as well as 19 tax havens become known as the Paradise Papers. There are many other, lesser known but still revealing, cases.
A combination of multi-government action and document leaks mean offshore account holders are aware they may have their wealth holdings declared to their domestic tax authorities or included in media scandals. Offshore accounts are no longer seen as a place for tax evasion, and offshore banks do not want business which could discredit them.
What Are The Advantages Of Holding An Offshore Account?
Although the secrecy aspect should no longer be a reason to open an offshore account, there are a number of other benefits which are still attractive to investors. For example, a number of countries experience political and financial instability which can make currencies and financial assets insecure. Keeping your investments offshore in these circumstances protects their value.
The low tax environment can be used to your advantage as long as your wealth is fully declared to your domestic tax authorities, which you are usually required to do. You are likely to pay tax as a result, in line with the fiscal laws, but this would occur later than if your tax had been deducted immediately as interest was paid.
Furthermore, you may have your investment structured in a way which does not make you personally liable for taxes to the same extent as it would if you are an individual investor. Trusts and foundations are examples of this.
It used to be the case that offshore accounts would pay higher rates of interest, but this is rarely true these days. However, it may be possible to invest in financial vehicles that are inaccessible or unaffordable elsewhere.
Finally, the thriving financial centre in the Cayman Islands generates income, jobs and facilities which would otherwise be absent. It can be argued that the low tax regime means benefits are not fairly distributed, but without finance, the islands would have little industry to support them beyond tourism.
How Many Banks Are In the Cayman Islands?
The number of banks operating in the Cayman Islands fluctuates. According to AboutTheBanks.EU, there are currently 149 banks remaining in the Islands following the closure of a further 70 banks. Many of these are branches and subsidiaries of large, global banks. They are joined by private banks and a raft of financial services including hedge funds and insurance houses.
If you are looking for a bank account in the Cayman Islands, all the usual advice about interest rates, account charges and other terms and conditions apply. However, you must also be careful to check the bank’s credit rating and – importantly – the level of deposit guarantee. Most consumers weren’t even aware of this valuable protection for bank account funds until the global financial crisis of 2008 put banks around the world into jeopardy.
Under international pressure, the banks are increasingly careful about the account holders they accept. You will need to provide documentation to confirm your identity, and may be asked questions about the source of your income and wealth.
Cash In the Cayman Islands
The official currency of the Cayman Islands is the Caymanian dollar, shortened to KYD and displayed as $ or CI$ on price lists. It can be divided into 100 cents. One Caymanian dollar is worth slightly less than a US dollar, and the two currencies are fixed.
The frequently used coins are for 1, 5, 10 and 25 cents. The banknotes most commonly used are for 1, 5, 10, 25, 50 and 100 Caymanian dollars.
If you are withdrawing cash from an ATM using a card issued in the United States, you may be asked if you want to receive your cash in US dollars or KYD. US dollars are not official currency in the Cayman Islands and merchants are not under compulsion to accept them for payment, although in reality, many do.
Credit And Debit Cards In the Cayman Islands
Visa, Mastercard and AMEX are all widely accepted across the Cayman Islands. There are very few transactions where you cannot use a card or will be charged to use one. You do not need to withdraw and carry about large amounts of cash, it is an unnecessary risk.
If your card is registered in your home country, you will be charged a foreign transaction fee (often three percent) for each use in the Cayman Islands. Many merchants will convert the payment into US dollars for their customers from the States, but it is up to the card company as to whether they levy their foreign transaction charge on the payment. Some do, and some don’t. Meanwhile, you risk the merchant charging you more for the conversion.
If your stay in the Cayman Islands is not for long, you can seek out a card which will not charge foreign transaction fees anywhere in the world. They are normally offered without the cashback, airmiles or low rates of interest which are used to promote other cards.
If you are living on the Cayman Islands for any length of time, it is important to obtain a card registered to your address there. This way, you will avoid foreign transaction charges altogether when shopping locally.
Read more about this country
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