The Cayman Islands is considering Independence, rather than bow down to the pressures from the Group of Seven countries and the United Kingdom to open its bank records to international scrutiny.

The Caymans are under the same pressure as Bermuda from the European Union, the Group of Seven economic giants, the Organisation for Economic Co-operation & Development (OECD) and, potentially, the United Kingdom on its own, to meet new standards of openness in its international financial dealings.

But now a "top level government consultant'' in the Caymans, has been quoted in Portfolio International magazine as saying: "Cayman will go for Independence rather than open bank records which will destroy their banking industry.'' Recent actions by the Cayman Government tend to confirm this view. Under laws passed in the jurisdiction last month, alleged offences must pass what is being described as a "dual criminality'' test.

Under such a test, activity alleged by one country to be illegal must also be adjudged illegal in Cayman.

"Tax offences are not indictable in the Cayman Islands as there is no form of direct taxation in the territory. Alleged tax evasion will not satisfy the dual criminality test,'' Cayman Attorney General Richard Coles has been quoted as saying.

Caymans oppose OECD tax plans That means that requests for information made to Cayman would be turned down if the grounds for the request were alleged tax evasion. But clamping down on tax evasion is the driving force behind the proposed G7 and UK crackdown.

The G7 plans to name and list those countries which it considers do not meet minimum standards on money laundering legislation, although it is not clear whether this would extend to a jurisdiction's willingness to assist with tax investigations.

The recent release of the Edwards review of regulation in the Channel Islands has upped the stakes for all British Overseas Territories in retaining their allegiance to the UK, as the report extends the definition of financial crime into fiscal matters.

"The UK is changing the definition of financial crime to include tax evasion -- and is putting the pressure on for its Overseas Territories to adopt legislation that would open bank records for civil and tax investigations,'' said the Cayman consultant.

"Opening bank records will put the Cayman Islands out of business because they rely on confidentiality and they object to conducting other countries' tax investigations,'' he added.

British Foreign Secretary Robin Cook promised in February, 1998 to deliver a White Paper on the future of the British Overseas territories by November of last year, together with a checklist of compliance to be put into motion by December 31, 1998 -- but nothing has been forthcoming yet.

This week a delegation from the Commonwealth Parliamentary Association has been visiting Bermuda to discuss such matters as the White Paper.

Bermuda takes the position that it is not a tax haven, in that it taxes its international and domestic companies in exactly the same fashion. Bermuda also has anti-money laundering legislation on its books.