October 25, 2020

Cayman Islands furious at being listed in latest US Money Laundering and Financial Crimes List

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Screen Shot 2015-03-25 at 9.13.08 AMFrom Bureau for International Narcotics and Law Enforcement Affairs
International Narcotics Control Strategy Report Volume II Money Laundering
And Financial Crimes March 2015

Cayman Islands

The Cayman Islands, a UK Caribbean overseas territory, is an offshore financial center. Most money laundering that occurs in the Cayman Islands is primarily related to fraud and drug trafficking. Due to its status as a zero-tax regime, the Cayman Islands is also considered attractive to those seeking to evade taxes in their home jurisdictions.

The Cayman Islands is home to a well-developed offshore financial center that provides a wide range of services, including banking, structured finance, investment funds, various types of trusts, and company formation and management. As of June, 2013, the banking sector had $1.5 trillion in assets. In 2014, there were approximately 206 banks, 140 active trust licenses, 765 captive insurance companies, six money service businesses, and more than 92,000 companies licensed or registered in the Cayman Islands. According to the Cayman Islands Monetary Authority, as of September 2014 there were approximately 8,056 registered mutual funds, of which 397 were administered and 106 were licensed. Shell banks are prohibited, as are anonymous accounts. Bearer shares can only be issued by exempt companies and must be immobilized.

Gambling is illegal. The Cayman Islands does not permit the registration of offshore gaming entities. There are no free trade zones, and the authorities do not see risks from bulk cash smuggling related to the large number of cruise ships that dock in the jurisdiction.

For additional information focusing on terrorist financing, please refer to the Department of
State’s Country Reports on Terrorism, which can be found at: http://www.state.gov/j/ct/rls/crt/

DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR ILLEGAL DRUG SALES THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO

CRIMINALIZATION OF MONEY LAUNDERING:
“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes
Are legal persons covered: criminally: YES civilly: YES

KNOW-YOUR-CUSTOMER (KYC) RULES:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES
KYC covered entities: Banks, trust companies, investment funds, fund administrators, insurance companies and managers, money service businesses, corporate and trust service providers, money transmitters, dealers of precious metals and stones, and the real estate industry

REPORTING REQUIREMENTS:
Number of STRs received and time frame: 406: July 1, 2011 – June 30, 2012
Number of CTRs received and time frame: Not applicable
STR covered entities: Banks, trust companies, investment funds, fund administrators, insurance companies and managers, money service businesses, corporate and trust service providers, money transmitters, dealers of precious metals and stones, and the real estate industry

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS: Prosecutions: Not available
Convictions: Not available

RECORDS EXCHANGE MECHANISM:
With U.S.: MLAT: YES Other mechanism: YES
With other governments/jurisdictions: YES

The Cayman Islands is a member of the Caribbean Financial Action Task Force (CFATF), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.fatfgafi.org/topics/mutualevaluations/documents/mutualevaluationofthecaymanislands.html

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

In 2014, the Cayman Islands increased both its regulatory and law enforcement staffing. In order to better gauge the effectiveness of the Cayman Islands’ AML/CFT programs, authorities should release updated information on the numbers of suspicious transaction reports (STRs), prosecutions, and convictions.

Registered agents of private trust companies are obligated to maintain ownership and identity information for all express trusts under their control. International reporting suggests agents for private trust companies and individuals carrying on trust businesses may not consistently maintain identity and ownership information for all express trusts for which they act as trustees. There remains a lack of penalties for failing to report ownership and identity information, which undermines the effectiveness of identification obligations. An increasing percentage of Master Funds (numbering 2,733 as of September 2014) are regulated. Funds failing to maintain identity information are subject to fines.

In May 2014, the Cayman Islands passed the Cayman Islands Directors Registration and Licensing Law in an attempt to hold company directors and leaders of certain financial entities to higher standards and limit the instances of fraud. The Cayman Islands also should pay greater attention to the risks and proper supervision of non-profit organizations.

The Cayman Islands continues to develop its network of information exchange mechanisms and has a network of 35 signed information exchange agreements, with 27 in force.

As a UK Caribbean overseas territory, the Cayman Islands cannot sign or ratify international conventions in its own right. Rather, the UK is responsible for the Cayman Islands’ international affairs and may arrange for the ratification of any convention to be extended to the Cayman Islands. The 1988 Drug Convention was extended to the Cayman Islands in 1995. The UN Convention against Transnational Organized Crime was extended to the Cayman Islands in 2012. The UN Convention against Corruption has not yet been extended to the Cayman Islands; however, the full implementation platform for the anti-corruption convention exists under current Cayman law. A 2002 request for extension of the International Convention for the Suppression of the Financing of Terrorism to the Cayman Islands has not yet been finalized by the UK, although the provisions of the convention are implemented by domestic laws.
END

The Cayman Islands government is fighting hard to clear Cayman’s name. The Report is concerned the non-profit sector is not being supervised properly but the government says the Report is misleading and all its anti-money laundering legal measures are robust.

The Cayman Islands joins six other Caribbean countries Antigua & Barbuda, Bahamas, Belize, British Virgin Islands, Dominican Republic and Haiti.

Jude Scott CEO of Cayman Finance slammed the US Report. He said, “It appears that ComplianceAid has chosen to sensationalize media reports to negatively focus on Caribbean countries for the purpose of increasing attendance at ComplianceAid’s upcoming conference in Miami.”

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