CAYMAN ISLANDS: Enforcement Actions Against Financial Institutions on the Rise
Increasing Regulatory Scrutiny in the Cayman Islands
In recent years, enforcement actions against financial institutions in the Cayman Islands have seen a significant surge, with administrative fines being issued by the Cayman Islands Monetary Authority (CIMA) on a growing number of financial service providers (FSPs).
The Rise in Enforcement Actions
According to data from CIMA, the authority has been imposing increasingly large fines, ranging from tens of thousands of US dollars to over five million, on FSPs, including small service providers and major players in the market.
Factors Contributing to the Increase in Enforcement Actions
- The statutory power granted to CIMA in December 2017 to issue administrative fines for breaches of various regulatory acts and regulations
- The discretion given to CIMA to waive or reduce fines in certain circumstances
Understanding CIMA’s Powers
CIMA has the authority to impose fines for minor, serious, and very serious breaches, with maximum fines ranging from KYD5,000 to KYD1 million. Before issuing a fine, CIMA must follow a specific process, including investigating alleged breaches, appointing an Oversight Committee to consider the evidence, and allowing FSPs to make written representations before a final determination is made.
Appealing Fines
FSPs have the right to appeal any fine issued by CIMA to the Grand Court of the Cayman Islands within 30 days. In a recent landmark case, Maples Corporate Services Limited and Maples FS Limited v Cayman Islands Monetary Authority, the Grand Court considered the interpretation of regulation 12 of the Anti-Money Laundering Regulations (AMLRs) in the context of administrative fines.
Implications for FSPs
The court held that CIMA had applied an “absolutist”, “overly prescriptive” and “rigid” approach to its interpretation of the relevant provisions. The judgment has significant implications for FSPs, highlighting the importance of taking a risk-based approach when applying anti-money laundering regulations.
Experts’ Warning
Experts warn that the increasing trend of enforcement actions against financial institutions in the Cayman Islands underscores the need for FSPs to ensure they are compliant with all regulatory requirements and to seek early legal advice if they receive a breach notice or fine.