Financial Crime World

Regulatory Environment for Banks in the Cayman Islands

The Cayman Islands Monetary Authority (CIMA) oversees the banking industry in the Cayman Islands, ensuring that banks operate within a well-defined regulatory framework. Here are key points to consider:

Licensing Requirements

  • Banks must obtain a licence from CIMA to operate in the Cayman Islands.
  • The licensing process involves a thorough review of the bank’s application and a assessment of its suitability.

Fit and Proper Test for Controlled Functions

  • CIMA assesses the fitness and propriety of individuals who apply to perform controlled functions, such as directors or senior officers.
  • This evaluation includes:
    • Personal questionnaire
    • Resume
    • Character references
    • Financial reference
    • Police clearance certificate

Authorized Agents and Auditors

  • Banks must maintain a local presence in the Cayman Islands through two agents or have their registered office at a Class A bank or trust company.
  • Banks must have their accounts audited annually by a local auditor approved by CIMA.

Supervision and Monitoring

  • CIMA monitors banks’ activities through:
    • Off-site analysis
    • On-site inspections
    • Regular meetings with management

Capital Adequacy Requirements

  • Banks are required to maintain a minimum risk-adjusted capital adequacy ratio of 10% (12% for subsidiaries subject to consolidated supervision in another jurisdiction and 15% for banks not subject to such supervision).

Annual Review and On-site Inspections

  • Banks’ representatives must visit CIMA regularly to discuss their affairs.
  • CIMA may conduct on-site inspections outside the Cayman Islands, which would typically be more relevant to Class B banks.

Notification of Changes in Operations

  • Banks must notify CIMA if they make changes to their business scope or activities.

Please note that these requirements are subject to change and it is recommended that banks consult with legal counsel before making any major shifts in policy or embarking on new activities in the Cayman Islands.