Over the past 60 years, the Cayman Islands have evolved from a small territory with an unremarkable domestic economy into a globally recognized financial services power.
The foundation for the regulation, legislation and overall thought leadership that led the jurisdiction through this transformation was created in large part by consultation between public and private stakeholders. Cayman’s success story is one written by way of collaboration and one that could be replicated by other governments, private stakeholders and Professional Accountancy Organizations.
Private-public sector consultation can take many forms – from steering committees and town hall-style events to formal meetings or even an informal chat over the cup of coffee. Public consultation is a process used globally that aims to improve the transparency, efficiency, and effectiveness of regulation. Consultation on regulatory issues by the public sector involves and enables private sector groups, stakeholders and interested parties to have a voice prior to legislation being enacted and provides valuable information which results not only in higher quality regulation, but informed and fit-for-purpose legislation.
The development of the Cayman Islands’ financial services industry hinged largely on its “collaborative policy-making process”. The public and private sectors partnered to build a globally competitive jurisdiction through a strong regulatory framework and best practice.
This became increasingly evident in the years since 1959 when Cayman’s autonomy was steadily growing and its constitutional foundation was evolving. The two sectors worked together to ensure there was an effective and cost-efficient regulatory structure that “safeguarded the jurisdiction’s reputation and facilitated profitable financial activity that provided law firms, accountants, insurance companies, company agents, and others with profits and the government with resources from fees”. What could be considered to be the genesis of the Cayman Islands as a major financial centre, the 1960 Companies Law, was enacted through informal collaboration between the government of the day, Caymanians and expatriates.
For much of the 1960s and 1970s, these informal collaborations molded and shaped the financial services industry. The partnerships created at that time eventually evolved into informal and formal consultations as the regulatory regime matured, giving rise to the early Banks and Trust Companies Regulation Law and the Trusts Law.
This approach was responsible for a number of developmental achievements, including diversification in financial services. It was noted that the process was “a collaborative government, working very closely with the private sector in the midst of a time of great growth.” Other examples of this approach include the response to the collapse of Interbank in 1974 to strengthen the regulation empowering the Banking Inspectorate, the precursor to the Cayman Islands Monetary Authority and later the creation of the Cayman Special Trust Alternative Regime (STAR) Law in 1997, which represented a crucial “innovation” in trust structures. More recently, the Cayman Islands’ government overhauled its voting regulations after holding a public referendum and held town hall meetings between government, industry and public stakeholders on a controversial proposed cruise dock.
In all of these cases, government called on the expertise of industry leaders and used their advice in tandem with feedback from the islands’ residents in order to gauge public sentiment and create policy. This was especially important during Cayman’s infancy as a financial services centre, where the jurisdiction saw a rapid increase in population, economic activity and global relevancy.
In 1970, the Cayman Islands Society of Professional Accountants was established to regulate and promote the accounting profession in the Cayman Islands. The pioneers behind the society recognized their key role in protecting the public interest and the jurisdiction. It aimed to ensure those in the accountancy industry met internationally accepted standards and that those doing business in Cayman adhered to the Public Accountants Act and related rules, polices and regulations. CIIPA, which is an independent body, works with government entities and policy makers to promote and protect the welfare and interest of the accounting professional locally and globally. In recent years, CIIPA has worked hand-in-hand with Cayman’s Ministry of Financial Services and other entities to offer insight on Anti-Money Laundering measures and to create robust AML and CFT regimes. In 2017, CIIPA became the AML supervisory body for accounting firms and is charged with registering all accounting firms, monitoring for compliance as well as issuing guidance, directives and regulations. CIIPA members have also represented the industry’s interests on a government-led AML Steering Group, which is responsible for creating the jurisdiction’s National Risk Assessment.
During the COVID-19 pandemic, the Cayman Islands Government created several Strategic Economic Advisory Committees. It was a public-private initiative that broke Cayman’s economy into six industries and called upon the country’s best and brightest to shape the vision for Cayman’s post COVID-19 future. Several CIIPA members, including myself, participated on these committees, offering insight and expertise.
Of course, there can be drawbacks to public-private consultations and partnerships. They can lose power through over-use. Public stakeholders may not fully understand the nuances of a particular issue and the collaboration is often non-binding, meaning a government isn’t necessarily required to pursue a particular avenue simply because of what was discussed during a public-private consultation. Public-private projects also are often complex and require skills for negotiating and monitoring that may not be readily available for all governments. Furthermore, there are inherent risks involved with a newly elected government, which may not share the same vision as the previous one.
Generally speaking, however, collaboration between private and public sector is a strategic tool that the Cayman Islands has used to pursue economic stability, self-reliance, improved quality of life and sustainable development. Z. Tuncikiene et al. (2014), noted that “Public-private partnership is increasingly considered as an important aspect in the economy of any state and an attractive solution in pursuit of public policy goals”. The OECD-APEC Integrated Checklist on Regulatory Reform noted that regulations must be developed in an open and transparent fashion.
It is incumbent on PAOs, large and small, to assist and work in tandem with the public sector to help build stronger economies, to become more resilient to external and internal forces and generally improve the quality of life which will ultimately ensure the country’s own sustainability. The partnership between private and public sectors is essential. In Cayman, the profession is committed to working with the public sector by way of collaboration and consultation—through this we can help to make our countries and our world a better place.