Financial Crime World

Regulatory Requirements for Banks in the Cayman Islands

The Banking Supervision (Licensing) Regulations, 2009 (as amended), and the Banking Services Act (Revised) (BTC Act) outline various regulatory requirements for banks licensed in the Cayman Islands. The following are some of the key points:

Fitness and Propriety

  • CIMA’s Assessment: CIMA assesses the fitness and propriety of persons who have applied to perform a controlled function, including directors and senior officers.

Authorised Agents

  • Resident Agents or Class A Bank/Trust Company: Banks must either maintain a place of business in the Cayman Islands with two resident agents or have their registered office at a Class A bank or trust company and designate employees as authorised agents.

Banking Names

  • Approval from CIMA: Proposed names for banks are subject to approval from CIMA, and must not be too similar to existing banking institutions worldwide.

Auditors

  • Annual Audits: Banks must have annual audits with audited accounts filed within three months of the end of their financial year.

Supervision

  • Off-Site Analysis and On-Site Inspections: CIMA conducts off-site analysis and on-site inspections as part of its ongoing supervision.

Capital Adequacy

  • Minimum Risk-Adjusted Capital Adequacy Ratio: The minimum risk-adjusted capital adequacy ratio is 10%, but may be higher depending on circumstances (e.g., 12% for subsidiaries subject to consolidated supervision in another jurisdiction).

Annual Review

  • Regular Meetings with CIMA: Regular meetings between bank representatives and CIMA are recommended to discuss the bank’s affairs.

On-Site Inspections Outside the Cayman Islands

  • Reimbursement of Expenses: Banks may need to reimburse CIMA for reasonable expenses related to on-site inspections outside of the Cayman Islands.

Notification of Changes in Operations

  • Amendment to Business Plan and Review of Licence Status: Any significant changes in a bank’s operations require an amendment to its business plan and potential review of its licence status.

Administrative Fines Regime

  • Imposition of Fines by CIMA: The Cayman Islands’ administrative fines regime allows CIMA to impose fines for breaches of the Anti-Money Laundering Regulations (Revised) or certain prescribed provisions.

Economic Substance Requirements

  • Demonstration of Economic Substance in the Cayman Islands: Banks must demonstrate economic substance in the Cayman Islands if they carry on relevant activities, such as banking business.