WASHINGTON (Bloomberg) - A US congressional investigation of tax evasion in the Cayman Islands will end with a "boring" report that finds no evidence of wrongdoing, said Timothy Ridley, the Cayman Islands' top securities regulator.

The Senate Finance Committee last year ordered the Government Accountability Office (GAO) to investigate a building called Ugland House that is listed as the Cayman Islands headquarters of more than 12,000 companies and to look into tax compliance by entities registered there. The GAO investigative team visited the Caribbean island nation last month.

"The GAO is not going to find what the Senate Finance Committee wants it to find," Mr. Ridley, chairman of the Cayman Islands Monetary Authority, said in an interview. "I predict the GAO report will be long and thorough and quite boring."

Financial services and other firms set up registered offices in the Cayman Islands to have a tax and regulatory neutral location to conduct international business, Mr. Ridley said. The arrangement allows each party to a transaction to be subject to tax only in their own country, he said. The Cayman Islands do not have an income or corporate tax.

Hedge funds, for example, often set up a Cayman subsidiary to take in investments from foreign investors because the gains from those investments are not subject to US tax. There are currently 9,400 funds registered in the Cayman Islands.

"Paying tax is a legal obligation, not a moral obligation," Mr. Ridley said. "It's perfectly legal to try to minimise your tax burden."

Still, he acknowledged that most of the time, none of the parties to any transactions are located in the Cayman Islands and none of the money actually flows through the country.

Senate Budget Committee chairman Kent Conrad, a North Dakota Democrat who has long been a critic of offshore transactions and Ugland House, said he was not convinced.

"When you have thousands of companies doing business out of one five-storey building in the Cayman Islands, something isn't right," he said in a statement. "While Cayman officials may choose to defend these practices, the Congress ought not stand idly by as businesses scheme to avoid US taxes. Companies engaging in this charade are cheating the rest of us who pay."

The GAO team went to Grand Cayman, the largest of the three islands that make up the nation located in the Caribbean between Cuba and Jamaica, in the first week of March. The investigators met with government officials, including financial secretary Kenneth Jefferson and Cindy Scotland, managing director of the Cayman Islands Monetary Authority, according to government spokesman Ted Bravakis.

The GAO will not comment on the report before it is published, probably in July, GAO spokesman Chuck Young said.

The team also spent seven hours at the Ugland House offices of the law firm Maples & Calder, which does registration work for the companies who list their headquarters there. In a statement, Maples & Calder said representatives who provide the firm's main registered office services as well as specialists in insurance and compliance met with GAO officials.

"We see this as an opportunity to get our message out and explain what we do," said Mr. Bravakis, the Cayman government representative.

Ridley said US politicians are likely to remain sceptical about the offshore services Cayman and other countries provide.

"Those of us in offshore, if we're going to continue to do what we do, are going to have to accept that were never going to be universally liked," he said.