Cayman Islands Fails to Stem Tide of Money Laundering
A Key Player in International Money Laundering Schemes
The Cayman Islands, a tax haven and home to some of the world’s largest hedge funds, has been identified as a key player in international money laundering schemes. According to a recent report, released almost two years after it was written, the government of the Cayman Islands recognizes that its financial system is vulnerable to abuse.
Vulnerabilities in the Financial System
The report highlights several vulnerabilities in the Cayman Islands’ financial system, including:
- Lack of Physical Presence: The majority of banks operating in the Caymans don’t have a physical presence in the country, making it difficult to supervise their activities.
- Excluded Persons: Excluded Persons, who are exempt from licensing requirements, are vulnerable to money laundering due to limited supervision.
- Mutual Funds with Unknown Beneficial Owners: Mutual funds registered in Cayman often have main activities that do not occur within the jurisdiction, and the identity and locations of ultimate beneficial owners may not be known.
Under-Resourced Financial Crimes Unit
The report also notes that the Financial Crimes Unit (FCU), which is responsible for investigating financial crimes, is woefully under-resourced. With only 18 staff members to investigate US$1.3 trillion in assets, the unit faces significant challenges in processing complex investigations.
Need for Decisive Action
The report recommends “decisive action” around practically the entire range of anti-money laundering measures, including regulations, supervision, sanctions, intelligence, enforcement, and domestic and international co-operation.
A Call to Action
The Cayman Islands authorities have a few months to demonstrate their commitment to addressing these issues before being assessed by the Financial Action Task Force (FATF) later this year. One concrete measure they could take is setting up a central public register of beneficial ownership.