Cayman Islands Intensifies Anti-Money Laundering Efforts

The Cayman Islands has strengthened its anti-money laundering (AML) regulations to combat financial crimes, including money laundering and terrorist financing. The new measures aim to enhance transparency and prevent the misuse of financial systems.

Reporting Requirements

• Financial institutions must report suspected money laundering or terrorist financing to the Financial Reporting Authority (FRA), regardless of the transaction amount.
• Payment service providers are required to collect and maintain payer/payee information for wire transfers and report any persistent non-compliance or restrictions in business relationships to the FRA.

Cross-Border Transactions

• Financial institutions must assess country risk, identify incomplete transfers, and establish risk-based policies and procedures for cross-border transactions.
• Institutions conducting correspondent banking relationships must undergo enhanced due diligence, including gathering information on the respondent institution’s reputation, AML controls, and previous issues related to money laundering or terrorist financing.

Customer Identification and Due Diligence

• Financial institutions are required to implement customer identification and due diligence procedures tailored to their specific risks.
• This includes identifying and verifying applicants, adopting a risk-based approach to assess money laundering and terrorist financing risks, and maintaining accurate records of customer information and transactions.

Prohibition on Shell Banks

• The regulations prohibit financial institutions from forming business relationships with shell banks, which are defined as institutions without physical presence in their incorporating jurisdiction and no effective supervision.
• This measure aims to prevent the misuse of financial systems by these types of entities.

Reporting Suspicious Activity

• Under the Proceeds of Crime Act, individuals must report suspicions of money laundering or criminal conduct to a designated officer.
• Entities must also obtain customer due diligence information and file a suspicious activity report (SAR) if they are unable to do so without risking “tipping off” the suspect.

Information Sharing

• The regulations facilitate information sharing between financial institutions, government authorities, and businesses subject to anti-money laundering controls.
• This includes public-private information exchange, which allows for the sharing of information and cooperation in AML efforts.

Beneficial Ownership Regime

• The Cayman Islands operates under a beneficial ownership regime, which regulates the collection, maintenance, and sharing of information about the ultimate beneficial ownership or control of companies and limited liability companies.
• This regime is integrated into the Companies Act and Limited Liability Companies Act and provides adequate, current, and accurate information to government authorities and financial institutions.

The new measures demonstrate the Cayman Islands’ commitment to combating financial crimes and protecting the integrity of its financial system.