As a leading and competitive international financial centre, the Cayman Islands has established its regulatory framework based on relevant international standards of supervision and co-operation with both local and overseas regulatory authorities.
The Cayman Islands Monetary Authority plays a central role in the fight against money laundering and terrorism financing. Section 6(1)(b)(ii) of the Monetary Authority Law gives the Authority legal responsibility, as part of its regulatory function, “to monitor compliance with the money laundering regulations.” These regulations prescribe measures to be taken to prevent the use of the financial system for the purposes of money laundering and terrorist financing. In addition to the Anti-Money Laundering Regulations, the regulatory framework against financial crime in the Cayman Islands includes the Proceeds of Crime Law, the Terrorism Law and the Proliferation Financing (Prohibition) Law.
The Cayman Islands has implemented the Financial Action Task Force’s (FATF) 40 Recommendations on the Prevention of Money Laundering and the Countering of Terrorist Financing, which are international standards for effective anti-money laundering and counter terrorist financing regimes. In 2007, the Cayman Islands were assessed against FATF’s 40 Recommendations. The mutual evaluation report can be found here .
The Cayman Islands are a member of the Caribbean Financial Action Task Force (CFATF) and observe the CFATF’s 1992 Kingston Declaration on money laundering. This declaration endorsed the implementation of the 1988 United Nations Vienna Convention Treaty on the trafficking of narcotics, the Organisation of American States Model Regulation for anti-money laundering and anti-narcotics, and the 40 FATF Recommendations.
The national stakeholders involved with monitoring compliance and developing the AML/CFT framework include: the Anti-Money Laundering Steering Group (AMLSG); the Anti-Money Laundering Unit (AMLU); the Ministry of Financial Services and Home Affairs (MFSHA); the Cayman Islands Monetary Authority (CIMA); the Office of the Director of Public Prosecutions (ODPP); the Inter-Agency Coordination Committee (IACC); the Department of Commerce and Investment (DCI); the Financial Reporting Authority (FRA); the Cayman Islands Customs Department (Customs) and the Financial Crimes Unit (FCU) of the RCIPS.
The AMLSG is the governing body responsible for the general oversight of AML/CFT policy in the Cayman Islands, as stated in section 5 (2) (a) of the Proceeds of Crime Law. It is also responsible for the general administration of the FRA; for promoting effective collaboration between regulators and law enforcement agencies; and for monitoring interaction and co-operation with overseas financial intelligence units.
Members of the AMLSG include: Chairman - Hon. Attorney General; Deputy Chairman - Chief Officer, Ministry of Financial Services and Home Affairs; the Commissioner of Police; the Collector of Customs; the Managing Director of the Cayman Islands Monetary Authority; the Solicitor General; and the Director of Public Prosecutions.
The AMLU is comprised of the Head of Policy, a Senior Legal & Policy Officer, a Policy Officer, and an Administrative Manager.
The Role of the AMLU is to:-
The IACC is the body responsible, at the operational level, for
The IACC is chaired by the Head of the AMLU, and includes representatives from the following agencies: CIMA; the DCI; the MFSHA; the FRA; the FCU; the ODPP; and Customs.
The FRA is the Cayman Islands’ financial intelligence unit with responsibility for receiving, analysing and disseminating suspicious activity reports, which are disclosures of information on potential activities related to the proceeds of criminal conduct, money laundering and the financing of terrorism. The FRA derives its powers and responsibilities from the POCL.
Further information regarding the FRA can be found at: http://www.fra.gov.ky/
The AML/CFT legal and regulatory framework of the Cayman Islands is responsive to emerging risks and is informed by the themes from the NRA and the resulting national AML/CFT Strategy. The goals of the strategy include:
The key legislation and regulations in support of the Cayman Islands efforts to combat money laundering, terrorism financing and proliferation financing are described below:
The Proceeds of Crime Law (2017 Revision) (POCL), when first enacted, repealed the Proceeds of Criminal Conduct Law as well as the money laundering sections of the Misuse of Drugs Law.
The POCL creates criminal offences relating to money laundering. Under the POCL, the offence of money laundering includes concealing, disguising, converting, transferring or removing criminal property. It is also an offence to conceal or disguise the nature, source, location, disposition, movement or ownership of criminal property. Property from unlawful conduct can be in different forms. Property wherever situated includes: money, all forms of real or personal property, and other intangible or incorporeal property. POCL details the mechanisms for tracing original property, disposing property and for mixing property. Any profits accrued from such property are also considered as representing property which was obtained through unlawful conduct.
Furthermore, failure to make a disclosure regarding another person who is engaged in criminal conduct and tipping off, meaning where an individual knows or suspects that a disclosure is about to take place, is taking place or has taken place and the individual makes a disclosure which is likely to prejudice any investigation, are also offences.
The POCL also authorises courts in the Cayman Islands to issue confiscation orders against a defendant who is convicted of an offence under the POCL.
The Anti-Money Laundering Regulations (2017 Revision) (AMLRs) have repealed and replaced the Money Laundering Regulations (2015 Revision). They endeavour to align the anti-money laundering framework in the Cayman Islands with FATF Recommendations.
Key changes include but are not limited to:
Financial service providers that do not comply with the AMLRs commit an offence.
The 2017 Terrorism Law criminalises the act of terrorism and combats the financing of terrorists and terrorists’ organizations. Under the Law, any person who provides property with the knowledge or intention that the property would be used to carry out an act of terrorism, or used by a terrorist or terrorist organization, commits an offence. Terrorist property includes: ‘property that is the proceeds of, or used in, or intended or allocated for use in, the financing of acts of terrorism, terrorists or terrorist organisations’ “regardless of whether the property is from legitimate sources.”
The Terrorism Law allows a court to make a forfeiture order against any property intended to be used for the purpose of terrorism.
The new revision of the law captures acts committed outside of the island if such acts would have constituted an offence under the Cayman Islands Terrorism Law. Further amendments to the Terrorism Law include the requirement for the Financial Reporting Authority to provide a list of designated persons to non-financial businesses and professions; the freezing of funds and economic resources without providing prior notice and the reporting obligations on the part of a relevant institution.
Under the Proliferation Financing (Prohibition) Law (2017 Revision) (PFPL) proliferation is defined as ‘the development or production, or the facilitation of the development of production, of nuclear, radiological, biological, chemical weapons or systems for their delivery.’ The illicit financing of such activities is condemned under the aforementioned legislation.
Furthermore, the unauthorised financing of proliferation is documented in section 23A which states: A person who –
commits a money laundering offence for the purposes of POCL and the provisions of that Law shall apply in the investigation and prosecution of the offence and to any other procedure relating to that offence.
The FRA, in relation to any country, has been given powers to issue directions to any relevant persons; and persons operating in the financial sector, concerning the unauthorised financing of proliferation once they meet the conditions expressed in section 5 of the PFPL.
In 1986, the Cayman Islands Government signed a Mutual Legal Assistance Treaty with the United States that allows for the exchange of information between the United States and the Cayman Islands in respect of criminal activity.
The AMLRs apply to relevant financial business. Section 2 of the Proceeds of Crime Law defines “Relevant Financial Business” as the business of engaging in one or more of the following -
Schedule 6 of the Proceeds of Crime Law lists the activities that fall within the definition of “Relevant Financial Business.” These are:
The updated Guidance Notes on the Prevention and Detection of Money Laundering and Terrorist Financing in the Cayman Islands (the 2017 GNs) were issued to provide general guidance to financial services providers on the prevention and detection of money laundering, terrorist financing and proliferation financing in the Cayman Islands. They also aim to provide transparency and consistency in the interpretation and application of the AMLRs. The 2017 GNs provide practical guidelines that represent best practice for the development of anti-money laundering procedures in line with international standards.
The 2017 GNs should be read in conjunction with the regulatory laws and more importantly, with the legislation pertaining to the AML/CFT framework of the Cayman Islands. The 2017 GNs are an important feature of the AML/CFT regime of the Cayman Islands and non-compliance with them will be taken into account by the Courts in determining whether a person has breached the relevant provisions of the POCL or the AMLRs; and by CIMA in determining whether to exercise any of its enforcement powers for breaches of the AMLRs.
Sections 136(5) and 137(4) of the Proceeds of Crime Law state that in deciding whether a person committed an offence under this section the court shall consider whether the person followed any relevant guidance which was at the time concerned - (a) issued by the Monetary Authority; and (b) published in a manner approved by the Governor in Cabinet as appropriate in its opinion to bring the guidance to the attention of persons likely to be affected by it.
Regulation 56(2) of the AMLRs provides that in determining whether a person has complied with any of these regulations a court - (a) and (b)
Regulation 56(4) of the AMLRs provides that in determining for breach of these regulations, the Supervisory Authority shall take into account (a) these regulations; and (b) any supervisory or regulatory guidance.