Financial Crime World

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Cayman Islands Failing to Meet Anti-Money Laundering Expectations

A recent assessment by global financial authorities has raised concerns about the Cayman Islands’ anti-money laundering (AML) and combating the financing of terrorism (CFT) regime. Despite efforts to improve, significant deficiencies remain, threatening the jurisdiction’s ability to meet international standards.

Assessment Highlights Deficiencies

The report highlights a lack of effectiveness in implementing AML/CFT measures, particularly in the areas of:

  • Simplified measures
  • Reliance on third parties
  • Higher-risk countries

These shortcomings could weaken the jurisdiction’s AML/CFT regime if left unaddressed.

National Risk Assessment Commended, but Incomplete

The Cayman Islands’ National Risk Assessment (NRA) was commended for its inclusive approach, involving competent authorities and the private sector in assessing risks. However, the report notes that the NRA did not provide a comprehensive risk profile, failing to analyze risks outside of the formal supervision regime and those inherent within the jurisdiction’s role in the international financial sector.

Coordination Bodies Show Functionality

Coordination bodies within the Cayman Islands, such as:

  • Anti-Money Laundering Steering Group (AML SG)
  • Inter-Agency Coordination Committee (IACC)

have shown some functionality. However, the IACC was constituted just prior to the assessment and has not fully exercised its mandate.

Communication and Awareness Limitations

The report also highlights a lack of communication between national authorities and the private sector regarding ML/TF risks, limiting awareness among financial institutions. It recommends that the jurisdiction provide comprehensive results of its NRA findings to foster improved application of AML/CFT measures.

Recommendations

To meet international expectations, the Cayman Islands must address these shortcomings and strengthen its coordination, communication, and implementation of AML/CFT measures. Specifically:

  1. Address technical compliance deficiencies in simplified measures, reliance on third parties, and higher-risk countries.
  2. Conduct a comprehensive risk assessment that includes analysis of risks outside of the formal supervision regime and those inherent within the jurisdiction’s role in the international financial sector.
  3. Enhance coordination and cooperation among competent authorities through the IACC and AML SG.
  4. Improve communication between national authorities and the private sector regarding ML/TF risks to foster improved application of AML/CFT measures.

Timeline

  • Assessment conducted by global financial authorities
  • Report highlights significant deficiencies in Cayman Islands’ AML/CFT regime
  • Recommendations aim to strengthen coordination, communication, and implementation of AML/CFT measures

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