Cayman Islands Crack Down on Money Laundering Operations: An Overview of Laws, Regulations, and Enforcement Agencies
In the crystal-clear waters of the Caribbean, the Cayman Islands are recognized as a global financial hub with a diverse economy. However, this tropical paradise has not been immune to the shadowy world of money laundering and other financial crimes. This article provides an overview of the legal framework in place to combat these illicit activities, focusing on the relevant laws and regulations, key enforcement agencies, and regulatory requirements.
1. Money Laundering Crimes and Criminal Enforcement
1.1 The Proceeds of Crime Act
Money laundering is a criminal offence in the Cayman Islands, with the main legal authority being Part 5 “Money Laundering and Other Criminal Conduct-Offences” of the Proceeds of Crime Act (2024 Revision) as amended (POCA). The Cayman Islands Constitution Order 2009 empowers the Director of Public Prosecutions (DPP) to bring criminal proceedings regarding any offence against any law in force in the Cayman Islands.
1.2 Money Laundering Offences and Predicate Offences
Under POCA, money laundering includes concealing, disguising, converting, or transferring criminal property, removing it from the jurisdiction, entering into suspicious arrangements, and possessing criminal property. Predicate offences range from drugs trafficking to tax evasion, inchoate offences, and even fraud. Tax evasion falls under the ambit of money laundering predicate offences.
1.3 Extraterritorial Jurisdiction and Foreign Crimes
The POCA and related regulations apply to foreign criminal activities and proceeds. The Penal Code (2022 Revision) stipulates that if an act partly occurs within and partly beyond the jurisdiction, individuals involved within the jurisdiction may be tried and punished as if the entire act took place within the jurisdiction. Cayman Islands companies can be held accountable for the actions of their officers, employees, and agents abroad.
2. Anti-Money Laundering Regulatory/Administrative Requirements and Enforcement
2.1 Cayman Islands Monetary Authority
The Cayman Islands Monetary Authority (CIMA) is the primary financial services regulator and oversees AML compliance for financial services providers. Common requirements include customer due diligence (CDD), transaction monitoring, record-keeping, reporting obligations, and compliance programmes.
2.2 Regulation by Self-Regulatory Organisations and Professional Associations
The Cayman Islands Legal Practitioners Association (CILPA) and the Cayman Islands Institute of Professional Accountants regulate their members’ AML compliance.
2.3 Enforcement and Compliance
The Cayman Islands Police Service Financial Crime Unit, the Cayman Islands Bureau of Financial Investigations (CIBFI), the Financial Crime Investigation Unit (FCIU), the Department of Commerce and Investment (DCI), and Customs and Border Control all play a role in investigating and prosecuting money laundering offences.
2.4 Corporate Criminal Liability and Penalties
Corporations can be held criminally liable for money laundering, and penalties include fines and imprisonment.
2.5 Statute of Limitations
There is no statutory limit for indictable offences such as money laundering. However, charges for summarily-triable offences must be laid within six months from the time evidence becomes known.
2.6 No Parallel Criminal Offences
Enforcement operates at the national level, with no state or provincial offences.
2.7 Confiscation and Forfeiture
Property subject to confiscation includes assets and funds deemed to be the proceeds of crime, and it can be seized without a criminal conviction through non-criminal confiscation or civil forfeiture.
2.8 No Previous Convictions of Financial Institutions
To date, no banks or financial institutions have been convicted of money laundering in the Cayman Islands.
2.9 Settlements and Records
In certain circumstances, criminal actions may be resolved or settled outside of the judicial process. Records of such settlements may be accessible to the public, unless governed by confidentiality provisions.
2.10 AML Enforcement Priorities
Key focus areas include fraud, corruption, tax evasion, drug trafficking, gambling, misuse of corporate structures, terrorism financing, proliferation financing, virtual currencies, gold storage, and human trafficking.
3. Virtual Assets and Non-Fungible Tokens (NFTs)
3.1 Definition and Regulation
Virtual assets and NFTs are subject to the Virtual Asset Service Providers (VASP) Law (2024 Revision) and regulations, obligating VASPs to comply with AML/CFT/PF requirements and FATF’s Travel Rule. The regulatory status of NFTs continues to evolve.
3.2 Compliance Programmes and Recordkeeping Requirements
Compliance programmes for NFTs are similar to those for virtual assets, focusing on KYC, risk-based policies, customer onboarding, and recordkeeping.
3.3 Recordkeeping and Reporting
VASPs must collect and maintain payer/payee information for virtual asset transactions and report persistent non-compliance, termination of business relationships, and inadequate payer information to the FRA.
3.4 Cross-Border Reporting Requirements for Virtual Asset Service Providers
Cross-border transactions trigger assessment of country risk, identification of incomplete transfers, and implementation of risk-based policies and procedures to ensure AML compliance.
In conclusion, the Cayman Islands have a robust regulatory framework in place to combat money laundering, incorporating international standards and a collaborative approach between government agencies, self-regulatory organisations, and financial institutions. These measures aim to safeguard the jurisdiction’s reputation as a leading global financial hub while maintaining a strong commitment to combating money laundering and financial crimes.