Financial Crime World

Cayman Islands Regulators Intensify Enforcement Efforts

The Cayman Islands Monetary Authority (CIMA) is stepping up its enforcement actions against firms that fail to comply with Anti-Money Laundering (AML) and Combating Financing of Terrorism (CFT) regulations. The authority has already issued nine fines to date for breaches of the AML Regulations.

Strengthening AML Controls

According to industry experts, CIMA’s focus on strengthening AML controls and procedures is expected to continue, with a particular emphasis on:

  • Policies and procedures
  • Ongoing monitoring
  • Employee training
  • Oversight of compliance functions

Firms that fail to strengthen their regimes may face enforcement action, including fines and even revocation of licenses.

Virtual Assets Under Scrutiny

The Cayman Islands has established itself as a fintech hub, attracting virtual asset firms to the jurisdiction. However, CIMA is actively policing the virtual asset perimeter, and entities found to be operating without registration or failing to comply with regulations may face enforcement action.

Quotes

“We expect CIMA to continue to police the perimeter actively, and if CIMA’s interpretation of the legislation is challenged robustly, some court cases may result.” - Ian Mason, partner at Walkers (Cayman) LLP

Regulators Take a Robust Approach

Recent enforcement actions have demonstrated that regulators are willing to take on more challenging cases, testing the limits of their enforcement powers. The Maples case and the Sterling Asset Management case suggest that CIMA is committed to bringing more complex cases.

Cases

  • Maples: Judge commented on “envelope-pushing”
  • Sterling Asset Management: CIMA took a robust approach

Beneficial Ownership Regime Under Scrutiny

The Registrar of Companies has imposed notices of investigation, decision, and administrative fines for non-compliance with the Beneficial Ownership Regime. In 2022, the regime was amended to include a duty to keep Registers up to date. Entities found to be in breach of this requirement may face fines and other enforcement action.

Data Protection Enforcement

The Ombudsman may serve enforcement orders and monetary penalties for breaches of the Data Protection Act. Recent cases have seen enforcement notices issued for cybersecurity incidents, with companies required to take steps to prevent future breaches.

Quotes

“We expect enforcement action for data breaches to continue.” - Lucy Frew, partner at Walkers (Cayman) LLP

Experts Weigh In

Ian Mason and Lucy Frew, partners at Walkers (Cayman) LLP, highlighted the importance of firms strengthening their AML controls and procedures to avoid enforcement action. They also cautioned that regulators are taking a more robust approach, testing the limits of their enforcement powers in challenging cases.

Quotes

“Firms must take proactive steps to ensure compliance with regulations.” - Ian Mason “The Cayman Islands is a major financial hub, and it’s essential that firms operate within the regulatory framework.” - Ian Mason

Conclusion

The Cayman Islands’ regulatory landscape is becoming increasingly robust, with CIMA and other authorities taking a more active approach to enforcement. Firms operating in the jurisdiction must ensure they are compliant with regulations to avoid fines and other penalties. As experts predict more enforcement action in the future, it’s essential that firms take proactive steps to strengthen their controls and procedures.