Financial Sector Warned Against Money Laundering, Terrorist Financing, and Proliferation Financing
The Cayman Islands financial sector has been issued a warning to remain vigilant against the risks of money laundering (ML), terrorist financing (TF), and proliferation financing (PF). The government emphasizes the importance of implementing robust procedures to identify transactions linked to these illegal activities.
Financial Reporting Authority Mandates Disclosure
According to the Terrorist Listing Act, any person who suspects another has committed an offence under this law must disclose the information to the Financial Reporting Authority or the police as soon as reasonably practical. Failure to do so is punishable by imprisonment and fines.
FSPs Must Comply with International Sanctions Orders
Financial Sector Participants (FSPs) are required to take note of their obligations under different international targeted financial sanctions/orders, designations, and directions issued in relation to TF/PF. FSPs must:
- File suspicious activity reports
- Freeze funds
- Inform the Governor as required under the relevant laws/orders if they discover a relationship that contravenes any applicable sanctions orders or directions
What is Proliferation Financing?
Proliferation financing refers to the act of providing funds or financial services used for the manufacture, acquisition, possession, development, export, transportation, brokering, or use of nuclear, chemical, radiological, or biological weapons and their means of delivery. The Cayman Islands has implemented laws to prevent proliferation financing, including the Proliferation Financing (Prohibition) Law.
FSPs Must Identify High-Risk Products and Services
The financial sector must be aware of areas of concern, such as products that offer:
- Unlimited third-party funds
- Services where funds can be regularly paid to or received from third parties without evidence of identity
Examples of high-risk products include:
- Money transfer facilities through chequebooks
- Telegraphic transfers
- Deposits from third parties
- Cash withdrawals by credit and debit cards
Low-Risk Products Not Immune
While low-risk products may seem immune to ML/TF/PF risks, FSPs must still consider all relevant risks and take a risk-based approach in conducting business with customers. Geographical location, for example, can affect the ML risk and TF analysis.
Conclusion
The financial sector is urged to remain vigilant against these illegal activities and develop procedures to identify transactions linked to money laundering, terrorist financing, and proliferation financing. Failure to comply with regulations may result in severe penalties.