Cayman Islands Try to Clean Up Image, but Doubts Remain
GEORGE TOWN, Cayman Islands - For years, the Cayman Islands have been trying to shed their image as a money-laundering center.
One tactic: The islands adopted rules on large cash deposits similar to those in the Untied States and Britain.
"You would find it very difficult to walk into a bank here and deposit a suitcase full of money," said John Atkinson, inspector of banking in the Cayman Islands. "We have strict checks on currency."
If estimates by the United States and other members of the Group of Seven industrialized countries are correct, the world drug trade generates $34 million an hour, mostly in small notes.
How to deal with that money is a question that occupies drug barons, bankers, and police officers around the world.
All agree that the logistics of handling large amounts of dirty money are becoming more complicated.
The Caymans, one of the world's premier offshore banking centers and tax havens, have signed a mutual legal assistance treaty with the United States. The pact, one of a dozen that resulted from intense U.S. pressure on major banking centers, allows government investigators to pry the lid off bank accounts otherwise covered by tight secrecy laws.
Despite the treaty, Washington views the Cayman Islands and their banking enforcement with suspicion.
Reluctance to Change
A State Department report on money laundering last year said Cayman officials were reluctant to limit the features - from banking secrecy to liberal laws on the formation of corporations - that attracted over 500 banks to the Cayman Islands and turned them into a major world financial center.
"This caution," the report said, "allowed laundering to gain a strong foothold in the [financial] industry."
Such suspicions have been kept alive by worldwide action last month against the Bank of Credit and Commerce International, which is being accused of a catalogue of crimes that range from fraud to laundering drug money.
BCCI had an operations center in the Cayman Islands and made full use of their secrecy provisions to conduct dubious financial transactions.
Experts on money laundering say the BCCI case shows there is no way of keeping dirty money out of the international financial system, despite the progress being made on banking regulation or mutual legal assistance.
A Tangled Web
"Once the money flows to an offshore banking center, you have to be an Albert Einstein of finance to find out where the money came from and where it is going," said Charles Intriago, editor of the Miami-based newsletter Money Laundering Alert.
"There is no doubt that it would be much easier to flush dirty money out of the system if all the offshore centers and tax havens disappeared overnight," said Chuck Morley, a Washington-based consultant who advises banks on how to spot money-laundering ploys.
Some officials here privately admit that not many questions were asked in the early days of offshore operations in the Cayman Islands, whose fortunes changed dramatically in 1962.
Until then, they were a dependency of Jamaica, which in turn belonged to Britain. In 1962, Jamaica gained independence and the Caymans chose to remain a colony.
The new government drafted laws tailor-made for banks, trusts, and corporations seeking relief from harsh taxation and strict regulation elsewhere.
Mr. Atkinson said, "Cayman is doing its bit to try to prevent fraud and money laundering....We are a hell of a sight better than many others in the area."