Financial Crime World

Cayman Islands’ Financial Sector Contributes Significantly to Economy

The financial sector in the Cayman Islands plays a vital role in the jurisdiction’s economy. According to a recent report, financial services accounted for an impressive 31.8% of the GDP in 2019, generating a staggering $193.1 million in import duties.

Labour Force Composition

  • The majority of the labour force is employed in industries related to financial services.
  • Professionals and technical activities such as lawyers and accountants make up a significant proportion of the workforce.
  • Other key industries contributing to the labour force include:
    • Construction: 12.2%
    • Wholesale and retail trade: 11.9%
    • Professional, scientific and technical activities: 8.9%
    • Financial and insurance activities: 8.8%
    • Public administration and defense: 7.9%
    • Households as employers: 6.9%

Impact of COVID-19

  • The report highlighted the significant impact of COVID-19 on the economy, with a decline in real GDP of 6.7% and an increase in unemployment from 3.5% to 5.21%.
  • Despite these challenges, the jurisdiction has taken stringent public health measures to control community transmission of the virus.

Financial Services Sector

  • Funds are the most material part of the Cayman Islands’ financial services sector, including investment, mutual, and private funds.
  • The jurisdiction is home to a strong focus on large institutional investors and is the second-largest centre for portfolio investments after the United States and just ahead of Luxembourg.
  • According to the International Monetary Fund, derived portfolio liabilities increased from US$0.9 trillion in December 2004 to US$4.6 trillion in June 2020.

Key Players

  • Financial institutions play a crucial role in the jurisdiction’s economy, with securities and investment businesses having a total of US$1.3 trillion in assets under management.
  • Mutual fund administrators service approximately 16,000 funds with US$2.1 trillion under administration.
  • Trust company service providers (TCSPs) are also material to the jurisdiction’s economy, with company service providers (CSPs) accounting for:
    • US$876.1 billion in direct investment inflows in 2019
    • US$890.6 billion in direct investment outflows in 2019

Conclusion

  • While the significance of the Cayman Islands as a banking centre has decreased over the last decade, it remains an important sector.
  • External banking assets shrunk to US$579 billion at the end of 2020.