Cayman Islands Regulations for Virtual Asset Service Providers (VASPs)

The Cayman Islands has implemented regulations that require Virtual Asset Service Providers (VASPs) to conduct risk assessments, adhere to anti-money laundering (AML) measures, and document such assessments. In this article, we will explore the key requirements for VASPs operating in the Cayman Islands.

Conducting Risk Assessments and Adhering to AML Measures

According to the Cayman Islands Financial Reporting Authority, VASPs must conduct customer due diligence procedures, including enhanced customer due diligence where necessary. Additionally, they must adhere to recordkeeping measures and have frameworks in place for fulfilling statutory reporting obligations. These measures aim to prevent money laundering and terrorist financing.

Appointing Key Officers

To comply with the regulations, VASPs must appoint a:

• Money Laundering Reporting Officer (MLRO): responsible for reporting suspicious transactions
• Deputy MLRO: assists the MLRO in their duties
• Anti-Money Laundering Compliance Officer: ensures that the VASP is compliant with AML measures

Treatment of Cryptoassets

The Cayman Islands has clarified its stance on the ownership of cryptoassets, stating that they will likely be treated as property under Cayman law. This means that victims of crypto fraud may have access to a full range of remedies, including:

• Interim proprietary injunctions
• Disclosure orders
• Enforcement actions

Pragmatic Approach to Service

The Cayman courts have taken a pragmatic approach to service in cases involving “persons unknown” and have ordered service by email in some instances.

Enforcement of Foreign Judgments

Foreign judgments can be enforced in the Cayman Islands under the Foreign Judgments Reciprocal Enforcement Act or at common law.

Regulatory Developments

The Cayman Islands is working on implementing new regulations related to cryptoassets, including:

• Establishing a regulatory framework for initial coin offerings (ICOs) and other forms of digital token issuance
• Monitoring developments in the global cryptocurrency market and adapting its regulations accordingly

Key Takeaways:

• VASPs operating in the Cayman Islands must conduct risk assessments, adhere to AML measures, and document such assessments.
• VASPs must appoint a MLRO, deputy MLRO, and Anti-Money Laundering Compliance Officer.
• Cryptoassets are likely to be treated as property under Cayman law, providing victims with access to a range of remedies.
• The Cayman courts have taken a pragmatic approach to service in cases involving “persons unknown”.
• Foreign judgments can be enforced in the Cayman Islands under the Foreign Judgments Reciprocal Enforcement Act or at common law.
• The Cayman Islands is working on implementing new regulations related to cryptoassets, including ICOs and digital token issuance.