Financial Crime World

Title: Cayman Islands Boosts Financial Crime Prevention Measures: Key Findings and Recommendations from the MER Report

The Cayman Islands, known as a prominent international financial hub, has been actively working on strengthening its anti-money laundering (AML) and counter-terrorist financing (CTF) framework. In March 2019, a Mutual Evaluation Report (MER) was released, providing a comprehensive analysis of the jurisdiction’s AML/CFT measures and recommendations for improvements.

Key Findings from the Cayman Islands MER

The MER report highlights the following findings regarding the Cayman Islands’ AML/CFT measures:

  1. Commitment to AML/CFT: The jurisdiction exhibits a strong commitment to fortifying its AML/CFT regime through a well-developed legal and institutional framework.

  2. Inadequacies in the National Risk Assessment (NRA): The 2015 NRA provided a good understanding of domestic ML/TF risks, but it lacked key components, such as assessments related to legal persons or arrangements and international components of risk.

  3. Limited Information Sharing: The high-level summary of the NRA results shared with stakeholders did not offer sufficient detail, allowing businesses to fully apprehend ML/TF risks within the Cayman Islands.

Recommendations from the MER Report

The MER report offers the following recommendations to address the issues identified:

1. Implement a Risk-Based Approach:

The jurisdiction should embrace a risk-based approach to AML/CFT.

2. Improve National Cooperation and Coordination:

Further enhancements are required for operational-level integration and cooperation among law enforcement organizations and the FRA.

3. Strengthen Investigative and Prosecutorial Capabilities:

Focus should be placed on investigating and prosecuting ML/TF offenses that align with the jurisdiction’s risk profile. Additionally, stronger efforts in confiscation outcomes are necessary.

4. Enhanced Use of Financial Intelligence:

Improve the FRA’s ability to adequately analyze and disclose suspicious activity reports in a timely manner.

5. Increase TF Awareness:

Raise awareness and understanding of TF risks among competent authorities and the judiciary.

6. Transparency and Beneficial Ownership:

Promote transparency of beneficial ownership and tackle related challenges, particularly in partnerships.

7. Address Dependence on the UK for TFS:

Understand and implement TFS through targeted training and outreach.

8. Control Risks among Excluded Persons:

Perform better assessments and provide compliance information on excluded persons under the Securities Investment Business Law to determine the extent of understanding.

9. Greater Oversight of the NPO Sector:

Enhance oversight and implement risk-based approaches to the NPO sector.

With these recommendations in place, the Cayman Islands can continue its progress towards strengthening its AML/CFT framework and reducing ML/TF risks.

Key Findings and Recommendations at a Glance

  • Commitment to AML/CFT: Strong commitment to fortifying AML/CFT measures

    • Legal and institutional framework in place

  • Inadequacies in the NRA: Lack of risk assessments related to legal persons or arrangements and international components

  • Limited Information Sharing: High-level summary of NRA results does not offer sufficient detail for businesses

  • Effective Structural Cooperation: Well-established structures for cooperation and coordination among competent authorities

    • Further improvements required at the operational level

  • Investigations and Prosecutions: Need for stronger investigative and prosecutorial focus and outcomes

  • Financial Intelligence: Inefficient use of financial intelligence by FRA

  • TF Awareness: Enhance awareness and understanding of TF risks among competent authorities and the judiciary

  • Transparency and Beneficial Ownership: Promote transparency of beneficial ownership and tackle related challenges

  • Dependence on the UK for TFS: Address dependence on the UK for targeted financial sanctions through targeted training and outreach

  • Excluded Persons: Better assessments and compliance information are required for excluded persons under the Securities Investment Business Law

  • NPO Sector: Enhance oversight and implement risk-based approaches for the NPO sector.