Financial Crime World

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EXPOSED: How to Spot a Money Laundering Scheme in the Cayman Islands

The world’s sixth largest financial centre has been accused of turning a blind eye to money laundering, leaving citizens around the globe vulnerable to corruption and tax evasion.

A System Riddled with Vulnerabilities

According to a recent report by Transparency International, the Cayman Islands’ financial system is plagued with vulnerabilities, including:

  • Lax regulations: The islands’ financial laws are inadequate to prevent money laundering.
  • Inadequate supervision: Regulatory bodies lack the resources and authority to effectively monitor financial institutions.

These weaknesses have created an environment conducive to money laundering, depriving developing countries of much-needed public services and undermining institutions and democracy.

How to Spot a Money Laundering Scheme in the Cayman Islands

Here are some red flags that may indicate a money laundering scheme:

  • Lack of physical presence: Many banks operating in the Caymans don’t have a physical presence on the island, making it easier for them to launder money without being detected.
  • Excluded Persons: The Securities Investment Business Law (SIBL) exempts certain individuals and entities from licensing requirements, leaving them vulnerable to money laundering due to limited supervision.
  • Beneficial ownership: Many mutual funds registered in the Caymans have ultimate beneficial owners who are not necessarily known, making it difficult to track the flow of dirty money.
  • Under-resourced Financial Crimes Unit: The FCU has a staff of 18 to investigate US$1.3 trillion in assets, leaving them woefully under-equipped to tackle complex investigations.
  • Inadequate sanctions: Until recently, the Caymans’ sanctions for non-compliance with money laundering regulations were too low to provide an effective deterrent.

What’s Being Done

The Financial Action Task Force (FATF) will assess the Cayman Islands’ anti-money laundering system later this year, putting pressure on authorities to take decisive action. Transparency International has recommended that the Caymans set up a central public register of beneficial ownership as a concrete measure to tackle dirty money.

Stay Vigilant

As citizens and investors, it’s essential to be aware of the risks associated with money laundering in the Cayman Islands. By staying informed and vigilant, we can help prevent the flow of dirty money and promote transparency and accountability in the financial sector.