Financial Crime World

Cayman Islands’ Anti-Money Laundering and Combating Financing of Terrorism Regime: A Review

A recent assessment of the Cayman Islands’ anti-money laundering (AML) and combating financing of terrorism (CFT) regime has highlighted several areas of concern. While the jurisdiction has made efforts to improve its compliance with international standards, significant deficiencies remain.

Legislative Changes Not Yet Effective

The report notes that legislative changes aimed at strengthening the AML/CFT regime have not yet had a discernible impact on the effectiveness of the framework. As a result, assessors were unable to determine the extent to which these changes will improve the overall effectiveness of the regime.

Technical Compliance Deficiencies

  • Shortcomings in areas such as simplified measures
  • Reliance on third parties
  • Higher-risk countries pose significant threats to the jurisdiction’s AML/CFT regime

These deficiencies have the potential to weaken the regime if left unaddressed.

Risk Assessment Process

The Cayman Islands’ National Risk Assessment (NRA) process was inclusive of competent authorities and the private sector. However, the report notes that:

  • The process did not fully analyze risks present in sectors outside of formal supervision.
  • It did not assess the risks posed by legal persons and arrangements.

Coordination Bodies

The jurisdiction has coordination bodies such as:

  • Anti-Money Laundering Steering Group (AML SG)
  • Inter-Agency Coordination Committee (IACC)

While these bodies are in place, they have not yet exercised their full mandate. The report recommends that membership of these bodies be re-evaluated to ensure key agencies are represented.

Communication

The report notes that the Cayman Islands has published a summary of its NRA findings, but this did not provide sufficient additional context to be of utility to the private sector. It is recommended that national authorities communicate comprehensive results of the risks identified in the NRA report to the private sector to foster improved application of mitigation measures.

Financial Intelligence and Confiscation

The jurisdiction has an objective to remove financial benefits from crime, but its ability to identify cases for investigation contains a fundamental flaw. This shortcoming impedes the ability of competent authorities to pursue the financial elements of crime.

Conclusion

Overall, while the Cayman Islands has made efforts to improve its AML/CFT regime, significant deficiencies remain. Addressing these shortcomings is crucial to ensuring the effectiveness and integrity of the jurisdiction’s financial sector.