Cayman Islands’ Trust and Corporate Services Providers Face High Risk due to Cash-Intensive Nature
The trust and corporate services providers (TCSP) sector in the Cayman Islands has been identified as high risk for money laundering and terrorist financing (ML/TF), despite transactions being rated medium-high risk. The main concern is the sector’s cash-intensive nature, according to a recent report.
Understanding the TCSP Sector
The TCSP sector provides trust and corporate service support to cross-sectoral sophisticated international financing transactions, commercial investment products, and wealth management structures. With 477 licensees in Cayman, they are utilized in the shared management of approximately $694 billion across multiple sectors, making their size at medium-high risk for ML.
Risk Factors
The sector’s high-risk nature is attributed to its ability to manage assets within a regulated framework, even if those assets are located outside of the jurisdiction. The report notes that TCSPs typically maintain a physical presence in Cayman, and Nominee Trust Licensees and Controlled Subsidiaries carry the same risk as the parent that holds the Trust Licence, supervised by CIMA.
The following products and services offered by TCSPs are considered high-risk activities:
- Administrator
- Enforcer
- Executor
- Protector
- Trustee
- Director
- Registered Office services
Nominee (Trust) Licences and Restricted Trust Licenses are particularly concerning due to their potential for abuse.
Mitigation Strategies
To mitigate these risks, the sector is advised to:
- Implement robust anti-money laundering and counter-terrorism financing systems
- Conduct regular customer due diligence
- Carry out ongoing monitoring of client relationships
Conclusion
The TCSP sector’s nature, size, and complexity pose a medium-high risk for ML/TF, and therefore requires close monitoring and regulation to prevent illegal activities. By implementing effective anti-money laundering and counter-terrorism financing measures, the sector can reduce its risk profile and ensure compliance with regulatory requirements.