“No jurisdiction is reporting corruption enough through the anti-corruption mechanisms”

The quote above is from Cayman Islands Premier Alden McLaughlin’s Keynote Address to Chatham House Conference “Combating Global Corruption” on 4^th February 2014 in London UK.

The whole address, in my opinion, was excellent.

His opening statement was more than enough to grab one’s attention – “I believe it is important that we are able to have an honest conversation and I trust we can do so in the safety of this forum because here we all ought to be on the same team.”

The stinging word is “ought”. How many times in our lives have we been disappointed at the actions that seem incomprehensible to us but executed by others that seek to harm not only the side the person is supposedly on but him/herself?

The rules of the “current global and domestic framework” that are horrendous and costly are there to combat corruption and our ex-premier, McKeeva Bush, has said openly that if he was still in power he wouldn’t have signed the Foreign Account Tax Compliance Act (FATCA).

Obviously he hasn’t read or refuses to listen to what Gonzalo Jalles, CEO, Cayman Finance said:

“If an institution refuses to sign up to FATCA, 30% on every transaction it makes in US dollars would be withheld on their own behalf or on behalf of a customer.  So unless local banks were to sign up for FATCA, from the day of implementation, every time you made a transaction in a local bank, they would take 30% of your transaction value.  Even more, banks clear a CI Dollar cheque by transferring the equivalent US dollars between them in the US, so even CI transactions would be subject to a punitive tax kept by the US.  If the Cayman Islands Government and the banks wanted to escape FATCA, they would need to stop using the US dollar all together, and we would need to create a new currency system where our currency is not pegged to the dollar.  Given the UK and Europe are going the same way, we could not peg it to those currencies either.  Therefore, we would need a floating currency, which will automatically mean the complete disappearance of our international financial industry that represents over 50% of our GDP and government revenue.  Even if we were to make the silly assumption that hotels, restaurants, and every other business would not be affected by this loss, civil servants, elected officials, police, and social services beneficiaries would need to take a 55% cut in their salary, as the Government would loose 55% of its revenue.

If you still think the Cayman Islands Government and local institutions should have said “no”, I give up.”

Thank goodness, then, Bush is NOT still Premier. Perhaps he thinks he is Colonel Custer!

Even signing FACTA will not stop the corruption said McLaughlin.

“Unfortunately corruption thrives in complexity because criminals are not constrained by the cumbersome rules of supranational organisations or governments,” he said. “If all countries ….. do not subscribe to a common rulebook for everyone, and have the political will to play by the rules, then we will never be able to fully recover the proceeds of corruption.”

And McLaughlin made this strong point:

“No stronger interface exists between corruption and international financial centres than exists between corruption and every single country in this world. Finance is both global and digital. Therefore, corruption is global and digital; it does not solely reside in any particular geographic region, or in a particular grouping of countries or peoples.

“The most stubborn obstacle, then, that needs to be overcome in addressing the interface between corruption and all countries – not just the 98 identified by the US Department of State’s 2011 Money Laundering and Financial Crime Report – is the reluctance to acknowledge corruption as a truly global phenomenon.  Corruption exists everywhere and so must be effectively addressed in all countries, big and small, developed and developing, onshore and offshore.  And it is not enough to simply acknowledge the issue. Lip service is one thing; implementation and action are quite another.”

He also ‘had a go’ at the media, not his favourite flavour of the month since becoming Premier:

“This truth is so simple, but it is inconvenient to acknowledge it – inconvenient for political candidates who are looking for a scapegoat for mismanaged public finances and inconvenient for some of the news media that operate more as entertainers than purveyors of the truth.”

Wow! I had to duck from that potshot.

Then a pot shot from him at the general public:

“Lastly, it is inconvenient for the public – people who are weary of the abuses of trust committed in political offices and corner offices, but who often don’t have the time or inclination to read the many excellent technical reports that rate how each country complies with global standards. If they did, the spotlight and criticism would certainly widen to include all countries, and not just IFCs.”

At least the media have published “many excellent technical reports”. I take that as a plus on my side.

And I heartily applaud this:

“If we continue to dissemble in this manner, we will continue to be conquered, because the one segment of society that benefits greatly from this distortion of the truth is the criminals that we say we want to bring to justice.

“They are much less likely to operate in well regulated jurisdictions, like the Cayman Islands, where the spotlight is brightest and the attention is greatest. They will simply migrate to where there is less sunshine.”

The Premier reasons well that he doesn’t believe any of the rules and regulations are enough unless they are “globally developed, practiced and monitored”.

He then gave his country a thump on the back saying:

“While we have benefited in many ways from the spotlight, Cayman is review fatigued. We have been subjected to the most rigorous examinations, and signed up for others, and consistently we have been found to be in compliance – in some areas, more so than developed countries. A gathering of this calibre knows that this is independently verifiable.

“Over some 15 years, we have alternately endured or welcomed this scrutiny because we believed that it would test and prove our legislative and regulatory strength – and I reiterate, it has. And yet, we have watched with curiosity and sometimes extreme frustration, because no matter the outcome of the reviews and assessments, the negative perception of Cayman persists, and is promulgated by some who do know better. I will leave it to you to determine why other countries, until recently, have managed to escape the level of investigation that we have had.”

McLaughlin rounded of his address saying, “The point of the global initiatives is not to eradicate corruption in 98 countries and jurisdictions. It is to eradicate corruption in all of them. No country should be exempt from assessment. And by speaking the truth regarding these assessments, governments and financial institutions may be able to regain the public’s trust, and rebuild our local and global economies on a sturdier framework.

“For anti-corruption frameworks to be effective, corruption must be repositioned as a global problem. We cannot cherry pick countries to assess based on perception, and target them as the source of the problem, while allowing other countries to continue their practices with minimal scrutiny.

“Bringing together the public and private sectors, as well as civil society, to develop and monitor global anti-corruption efforts is worth further exploration. The cost of compliance must be minimised, without diluting the effect of the initiatives, for the private sector to fully take on its growing responsibilities.”

His final words were sobering for all of us:

“Truth will be the cornerstone of all effective global anti-corruption initiatives. Without it, the efforts will be too compromised by competing interests to fully succeed.”

And if jurisdictions don’t report corruption enough then the truth will not be heard at all.