Financial Crime World

Financial Crime Plagues Cayman Islands’ Economy

FATF Assessment Highlights Concerns

A recent assessment by the Financial Action Task Force (FATF) has highlighted significant concerns regarding financial crime in the Cayman Islands. The territory, a major international financial center with a banking sector valued at $1.365 trillion dollars, has been placed on FATF’s Grey List and the European Union’s High Risk Third Country list due to its inadequate anti-money laundering regulations.

Major Deficiencies Identified

The FATF mutual evaluation and European Union assessment have identified several key issues within the Cayman Islands’ anti-money laundering regime:

  • An overemphasis on domestic financial crime risks, with insufficient focus on international financial crime risks.
  • Failure to impose sanctions on entities that do not provide complete and up-to-date information on beneficial ownership.
  • A National Risk Assessment (NRA) that does not adequately assess the risks in non-supervised financial sectors.
  • Inadequate sanctioning and asset seizure of individuals and entities involved in money laundering and other financial crimes.
  • A reactive approach to financial crime, with a lack of coordination between regulatory agencies and financial institutions.

Mitigating Risk for Financial Institutions

Banks and other financial institutions operating in the Cayman Islands can take several measures to limit their risk:

  • Conduct thorough Know Your Customer (KYC) actions on clients registered or operating in the Cayman Islands.
  • Determine the entity type, business nature, and source of wealth and revenue.
  • Identify how other financial institutions are mitigating their risk in the Cayman Islands.
  • Provide training for analysts investigating entities with exposure in the Cayman Islands.

Continuing Improvements

Despite ongoing challenges, the Cayman Islands has made efforts to improve its anti-money laundering regime. FATF has rated the territory as largely compliant or fully compliant with all 40 of its recommendations. This progress provides financial institutions with more opportunities to manage their risk when working with Cayman Island entities.

Protecting Your Business

To ensure your business is protected against financial crime, explore our range of products and services designed to combat money laundering risks. Our Arachnys software offers frictionless KYC and AML solutions for financial service providers.