Financial Crime World

Money Laundering Defences and Outcomes in the Cayman Islands

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In the Cayman Islands, individuals accused of money laundering may face severe penalties if convicted. However, there are certain defences that can be used in court to avoid or reduce these charges.

Defences for Money Laundering

According to Section 133-135 of the Proceeds of Crime (2024 Revision), a defence can be raised if an individual acts in relation to the enforcement of the law, or believes on reasonable grounds that the relevant criminal conduct occurred outside the Cayman Islands and was not unlawful at the time. Additionally, professional legal advisers may use legal privilege as a defence, unless they knowingly provide information with the intention of furthering a criminal purpose.

Recent Amendments

A recent amendment to the Proceeds of Crime (Amendment) Act 2023 has changed the defences for concealing, arrangements, and acquisition, use, and possession in relation to money laundering. Now, individuals must have the consent of the Financial Reporting Authority (FRA) to commit these acts, and it does not apply to those who committed or were a party to the criminal act from which the property derives.

Criminal Outcomes

In the Cayman Islands, there is no plea bargaining system, and prosecutors will apply a two-part test to decide whether to lay charges. The maximum sentence for money laundering conviction under Sections 133-135 is:

  • 14 years’ imprisonment
  • Or an unlimited fine

For failing to make a suspicious activity report or tipping off, the penalties are:

  • Imprisonment for five years
  • Or an unlimited fine
  • Or both

Asset Forfeiture and Confiscation

The Proceeds of Crime (2024 Revision) Part III covers confiscation orders, which can be made after conviction. The court may order a benefit amount (total benefit) and a recoverable amount (the amount the defendant must pay). Non-payment of the confiscation order can result in imprisonment for up to 14 years.

Options

A restraint order can also be made under Section 45 of Part III, prohibiting an individual from dealing with realisable property. Civil recovery is another option, allowing the Director of Public Prosecutions to apply for action against property obtained through unlawful conduct.

Limitation Periods

There is no time limit within which a money laundering charge must be brought in the Cayman Islands, as it is an offence triable either way.

Extraterritorial Reach

The Cayman Islands’ money laundering laws have extraterritorial reach, applying to:

  • Companies incorporated within the jurisdiction
  • Conduct that occurs outside its borders where there is a sufficient nexus to the islands

These laws apply to:

  • Citizens
  • Non-citizens
  • Non-residents in certain circumstances

Conclusion

In summary, while the penalties for money laundering are severe in the Cayman Islands, individuals may use defences such as acting in relation to law enforcement or legal privilege to avoid charges. However, it is crucial to understand the complex legislation surrounding money laundering to ensure compliance with laws and regulations.