This article first appeared in Hedgeweek.

The hedge fund industry has welcomed a decision by the European Union to remove the Cayman Islands – a major offshore domicile for the global hedge fund industry – from a tax haven blacklist.

The Alternative Investment Management Association, the hedge fund industry’s global trade body, said the move was “good news” for the international alternative asset management community.

In February, the Economic and Financial Affairs Council (ECOFIN) – which comprises the 27 EU member states’ finance and economics ministers – agreed to add Cayman to an EU list of ‘non-cooperative’ tax jurisdictions.

The decision was made despite Cayman being in the process of implementing further regulatory modifications recommended by a review of international tax standards by the Council’s Code of Conduct Group.

Since then, AIMA’s Cayman members have worked closely with the islands’ financial services industry and the Cayman Islands government to address the EU’s requirements, while also looking to maintain its position as a leading international investment fund domicile, the industry trade body said on Tuesday.

“The Cayman Islands have been at the forefront of tax transparency in the asset management industry and the EU’s decision is a recognition of the jurisdiction meeting the most stringent conditions,” AIMA CEO Jack Inglis said of Tuesday’s move.

“This is good news for the alternatives industry, given the importance of the Cayman Islands as a fund and services centre globally.”

The EU’s removal of the Cayman Islands from the list was made at the first subsequent opportunity.

But Allison Nolan, founder and managing director of Athena International Management, said Cayman’s inclusion on the list “should never have happened”.

Nolan, whose boutique corporate governance-focused firm provides independent directors to the global hedge fund community, said the original decision stemmed mainly from timing issues and certain residual concerns.

“Since then, the Cayman Islands government has worked with the EU to identify and address these concerns resulting in a best-in-class regulatory regime governing investment funds and leading to today’s removal from the list of non-cooperative jurisdictions,” she added.

Cayman is the most popular offshore jurisdiction for hedge funds globally. Last year, the number of funds licensed by the Cayman Island Monetary Authority stood at more than 10,000.

AIMA pointed to the domicile’s full support for a range of initiatives led by the EU and OECD to promote good governance, as well as its participation in international and regional task forces aimed at combating corruption, money laundering and terrorist financing.

“This action by the EU acknowledges that the regimes established by the Cayman Islands for fund regulation and the wider economic substance requirement, as well as those for the exchange of tax and financial information, anti-money laundering and related measures are fully in line with international standards,” said Ronan Guilfoyle, AIMA Cayman Chairman.

The so-called ‘blacklist’ was drawn up by the EU in 2017 in a bid to tackle tax evasion and avoidance schemes. Following the removal of Cayman and Oman, it now comprises American Samoa, Anguilla, Barbados, Fiji, Guam, Palau, Panama, Samoa, Seychelles, Trinidad and Tobago, the US Virgin Islands and Vanuatu.