Financial Crime World

Cayman Islands’ Financial Centre Faces ML/TF Risks Amid Global Concerns

The Cayman Islands, a significant international financial centre, has been found to have considerable areas of potential money laundering and terrorist financing (ML/TF) risks. The jurisdiction’s role in the global economy necessitates a robust framework to mitigate the use of its financial sector as a means to launder funds.

Key Findings

  • The Cayman Islands’ financial sector, including the Special Economic Zone, has gaps in supervision that magnify ML/TF risks.
  • While private sector participants are well aware of and experienced in applying robust risk mitigating measures, there are still deficiencies in the jurisdiction’s capacity to optimally counter ML/TF.

Strengths

  • The Cayman Islands’ financial and non-financial sectors are well-established, with private sector participants skilled in applying relevant control measures.
  • The jurisdiction has a solid institutional framework in place, led by the Cayman Islands Monetary Authority (CIMA), the Financial Reporting Authority (FRA), and the Office of the Director of Public Prosecutions (ODPP).

Deficiencies

  • Technical compliance framework deficiencies:
    • Shortcomings in simplified measures
    • Reliance on third parties
    • Higher-risk countries
  • National Risk Assessment (NRA) did not include an appropriate risk assessment of legal persons or legal arrangements.
  • Analysis of terrorist financing required further examination.
  • Lack of information on an unsupervised segment of the securities sector impeded analysis.

Recommendations

  • Re-evaluate membership of coordination bodies, such as the Anti-Money Laundering Steering Group (AML SG) and the Inter-Agency Coordination Committee (IACC), to ensure key agencies are represented.
  • Strengthen AML/CFT regime by addressing deficiencies in technical compliance framework.
  • Improve risk assessment approach to include legal persons and legal arrangements.
  • Enhance coordination and cooperation among relevant agencies.

Conclusion

While the Cayman Islands’ financial centre has made progress in combating ML/TF, there are still significant risks that need to be addressed. The jurisdiction must work to strengthen its AML/CFT regime, improve its risk assessment approach, and enhance coordination and cooperation among relevant agencies.