Cayman not like “The Firm”

Few places in the world are used synonymously with tax evasion and financial crime like the Cayman Islands.

Cayman’s sometimes unsavoury tax haven image is caused by a heavy dose of Hollywood mixed with the history of offshore financial centres.

Today’s reality of Cayman as an international financial centre, however, could not be further removed from the reputation.

In 1993, the movie “The Firm” put Cayman on the map with an entirely fictional story about a young lawyer who joins a law firm that launders criminal proceeds for organised crime in the Cayman Islands.

The impact of the movie based on the novel by John Grisham is still known today in Cayman’s financial circles as the “Grisham effect”.

Although academic literature on financial crime and money laundering makes little mention of Cayman, and the islands have not been implicated in any serious financial crime for many years, the image still lingers on.

Avinash Persaud, finance professor at the London Business School, says the “Grisham effect” even led the Cayman Islands to move away from individual business towards institutional business.

“That is a very different landscape, much less scope for those kinds of problems and yet it still has the reputation to a large extent in the wider media of where it was 20 years ago,” he says.

Cayman is now a centre for a range of financial service transactions that are used predominantly by banks, hedge funds and corporations.

While Cayman’s tax regime – which has no income, profit or other direct taxation – certainly plays a part in these financial structures, it typically serves to simplify transactions rather than to completely eliminate the tax burden of those involved.

As such, Cayman companies are often used for joint ventures of companies from different countries, as it overcomes legal and language problems, creates legal certainty and ensures flexibility of the joint venture rules.

Firms from riskier markets in Asia or South and Central America, who find it difficult to attract investors in their home countries, use Cayman vehicles to raise funding or to list on one of the major stock markets in New York and other global financial centres.

Corporations and financial institutions also raise capital via the Cayman Islands by issuing Eurobonds or through securitisation, which converts existing assets or future cash flows into marketable securities.

In addition, Cayman is home to the vast majority of the world’s hedge funds. While the hedge fund managers are generally based in New York or London, the hedge fund service providers such as lawyers, fund directors, auditors, accountants and banks make up a large share of the local financial services industry. As a common law jurisdiction, Cayman is also one of the main global centres for the establishment of trusts.

Regulatory pressure on offshore financial centres, particularly during the past 15 years, has led to many reforms, and establishing offshore companies or opening bank accounts is often subject to more due diligence requirements in the Cayman Islands than in the US or Europe.

This compliance record extends to the exchange of tax information which the Cayman government has established with 27 governments around the world. Moreover, interest income of EU citizens in Cayman is reported to the respective local tax authorities in Europe. This list of tax information exchange agreements continues to grow.

“The Firm” myth continues with references in:


  • Heat (1995)
  • Fun with Dick and Jane (2005)
  • American Gangster (2007)
  • Haven (2006)
  • Mad Money (2008)
  • Blow (2001)
  • Contrabend (2012)

TV shows:

  • Burn Notice (USA)
  • Castle (ABC)
  • Law & Order (NBC)


  • The Girl Who Played With Fire (sequel to Girl with Dragon Tattoo) by Stieg Larsson
  • Havana Harvest by Robert Landoni