New Cayman Premier on Bridge-Building Mission to UK

The new Cayman Premier (Juliana O’Connor-Connolly) and other government officials are flying to London to meet the UK’s foreign office minister, Mark Simmonds, on Monday and Tuesday.

With just five months of the interim administration’s term to go before elections are held, some Caymanians have been questioning whether the trip would serve any useful purpose, but there is certainly a lot of bridge building to be done to restore good relations between the two territories following a torrid period of bad tempered exchanges when McKeeva Bush was in post.  Government minister Mark Scotland said. “The visit being made in the next week is not simply about the next few months, it’s about mending and rebuilding the relationship with the FCO and the UK because of what’s happened in the last few years and then strengthening it for the time going past the upcoming election.”

The delegation will doubtless be trying to smooth the waters, but will also need to discuss Cayman’s budget situation, which remains precarious.  It is not yet clear whether the Island will need to request an increase in the Cayman Islands Government’s overdraft facility, but the picture will become clear within the next couple of weeks, with January being a critical period for financial services revenues.   Cayman’s budget is being scrutinised this week by the FCO’s economic advisor Richard Holmwood, who is currently in Cayman.   

Grant Thornton to be appointed Receiver of Axiom Legal Financing Fund

Faced with a storm of criticism from shareholders, the directors of the embattled Axiom Legal Financing Fund have reluctantly agreed to the appointment of Grant Thornton as receiver, rather than KPMG which had been the directors’ choice.

In a letter to shareholders on Tuesday, the directors confirmed that they will support the application to have a receiver appointed for the fund at a February court hearing.

KPMG had been appointed in October to conduct an audit of the fund’s assets following fraud allegations which had been made, principally by OffshoreAlert, and for this reason the directors thought that they would be best placed to act as receivers.  However, it became clear that a significant majority of investors opposed this view because of concerns over independence and fee levels, and so the directors have reluctantly bowed to investor pressure to support the appointment of Grant Thornton instead.

Clydesdale Bank to close Guernsey operations

Clydesdale Bank International has announced that it is to close its Guernsey operations, through a gradual wind-down which is not expected to be complete before next year.  The news comes after a global review which has led to a decision that the Australian owned bank should focus on its core business, and will eventually lead to the loss of 19 jobs.

The Guernsey branch of the bank, which primarily provided services to expats and Guernsey residents, has stopped accepting new business and will be transitioning its existing customers.

Richmond Fiduciary open in Shanghai

Guernsey-headquartered trust company Richmond Fiduciary Group has opened a representative office in Shanghai. The office will be led by Jing Zhang, a Shanghai born and educated professional who is fluent in Mandarin, English and Italian.   The company, which was established in 1988, now employs more than 30 staff worldwide, including Hao Wang, Senior Partner of RayYin & Partners, who is retained by Richmond as a consultant to explain the nuances of international trust laws to Chinese individuals and professionals. The move reflects a growing trend amongst Channel Islands fiduciary business to look towards Asia for growth rather than relying primarily on the more mature European markets where there is an increasing emphasis on clamping down on legitimate opportunities for tax avoidance.

Play.com close retail business and withdraw from Jersey following abolition of LVCR

147 employees in Jersey are to lose their jobs within the next few months as Play.com decides to close its retail business and leave Jersey following last year’s abolition by the UK government of Low-Value Consignment Relief for imports from the Channel Islands.

Play.com was one of the highest profile companies operating from Jersey utilising the LVCR to import CDs, DVDs and other low value goods into the UK without the need to pay VAT, and became one of the UK’s largest online retailers.  It was sold to Japanese owners for £25 million in September 2011.

The company will also shed 67 UK jobs as a consequence of its withdrawal from direct retailing business.  200 or so staff will remain employed in the UK, focusing on developing the company’s marketplace business.

It is believed that the abolition of LVCR has already cost Jersey about 600 jobs – a significant number in a small jurisdiction which currently has a record 1,800 people out of work.

Tax Evasion Conviction forces Closure of Wegelin, Switzerland's Oldest Bank

In a shock move, Wegelin, Switzerland's oldest bank, is to shut its doors for ever after pleading guilty in a New York court to helping over 100 Americans evade over a billion dollars in taxes over a 10 year period.

The bank, which was established in 1741, admitted in court that it had intentionally opened accounts for US citizens to help them avoid tax and has been fined $57.8m. 

Otto Bruderer, a managing partner at the bank, told the court: "Wegelin was aware that this conduct was wrong.....from about 2002 through about 2010, Wegelin agreed with certain US taxpayers to evade the US tax obligations of these US taxpayer clients, who filed false tax returns with the Internal Revenue Service".

It becomes the first foreign bank to plead guilty to tax evasion charges in the US, although it is certainly not the only bank under investigation in a clamp down by the US Justice Department.

Four years ago UBS agreed to pay a $780m fine to US authorities in relation to tax evasion charges and agreed to reveal the details of US account holders, but it was not technically convicted of any crime – agreeing voluntarily to pay a fine in exchange for charges being dropped.

Credit Suisse, the other huge Swiss banking monolith, remains under investigation by the US authorities.

It had been expected that Wegelin would fight the charges on the basis that because it only had branches in Switzerland, it was bound only by its home country's banking laws.  However, the surprise move to throw in the towel will come as a blow to Swiss banks and to the Swiss government, which has been trying for months to negotiate a deal with the US which would protect Switzerland's banking secrecy.

Cyprus bailout talks deadlocked on issue of privatisations

Talks between Cyprus and the Troika negotiating a possible bail-out of the Cypriot economy are stalling because of a fundamental disagreement over privatisation of state-owned companies.

President Christofias has said that he will not agree to privatizations and that if the bailout creditors insist on privatizations as a condition of a deal, the accord would have to wait for the next government to sign it.  Cyprus holds presidential elections on 17th February and Christofias is not seeking re-election.  However, Cyprus' eurozone partners are scheduled to decide on the country's bailout deal on 21st January, which leads to an obvious timing issue.  The Cypriot government claims it has enough cash to pay its bills until March 2013, and the new President will take the reins on 1st March.  This leaves precious little time for any new incumbent to do all that is necessary to avert disaster.

It is not yet clear exactly how much cash the crippled Cypriot economy requires.  External estimates put the figure required to shore up its banks at around €10 billion (more than half the value of the national economy) but the Cypriots claim the real figure is much lower.   The picture should be clearer later this month, when international investment firm PIMCO and auditors Deloitte finish a review of the Island's financial situation.