Financial Crime World

Here is the rewritten article in Markdown format:

Cayman Islands Faces Serious Risks of Money Laundering, Report Reveals

The Cayman Islands, a tax haven and home to many financial institutions, has released a report highlighting serious risks of money laundering in its financial system. The country’s self-assessment, published earlier this month, reveals vulnerabilities in its anti-money laundering regulations and supervision.

Key Findings

  • The majority of banks operating in the Cayman Islands do not have a physical presence in the country, increasing the risk of fraud and tax evasion.
  • 85% of the world’s hedge funds are domiciled in the Cayman Islands, making it a hub for securities sector money laundering.
  • Many mutual funds registered in Cayman do not have their main activity occurring within the jurisdiction, making it difficult to determine the identity and locations of ultimate beneficial owners.

Vulnerabilities

The report identifies several vulnerabilities, including:

  • The lack of supervision over Excluded Persons, who provide services to high-net-worth individuals and are exempt from licensing requirements.
  • Inadequate resources for the Financial Crimes Unit (FCU), which has only 18 staff members to investigate over $1.3 trillion in assets.
  • Inadequate sanctions for non-compliance with Cayman’s money laundering regulations, previously set at $5,000 but raised to up to $500,000.

Recommendations

The report recommends “decisive action” around anti-money laundering measures, including:

  • Regulations
  • Supervision
  • Sanctions
  • Intelligence
  • Enforcement
  • Domestic and international co-operation

Next Steps

Local media has noted that the country will be assessed by the Financial Action Task Force later this year, which will look not just at paper commitments but also at whether Cayman is taking effective action against dirty money in practice. Authorities have a few months to show they are ready to shape up.

One concrete measure being proposed is the establishment of a central public register of beneficial ownership. Transparency International calls for immediate action from the Cayman Islands government to address these serious vulnerabilities and prevent the flow of dirty money through its financial system.