Financial Crime World

Guidance Notes on Money Laundering, Terrorist Financing, and Proliferation Financing

Introduction

These guidance notes are provided by the Cayman Islands Financial Services Division to help financial service providers (FSPs) understand their obligations and responsibilities in preventing money laundering, terrorist financing, and proliferation financing.

Money Laundering

Definition of Money Laundering

  • Money laundering is the process of disguising illicitly obtained funds to make them appear legitimate.
  • Terrorist groups use various methods to launder money, including:
    • Cash smuggling
    • Structured deposits
    • Wire transfers

Terrorist Financing (TF)

Vulnerabilities in Charities and Non-Profit Organizations (NPOs)

  • Charities and NPOs are vulnerable to being misused for TF.
  • Underground banking systems, such as the hawala system, have been used to move terrorist-related funds.

Responsibilities of Financial Service Providers

  • FSPs should be aware of these risks and develop procedures to identify suspicious transactions.

Proliferation Financing (PF)

Definition of PF

  • Proliferation financing refers to providing funds for the development or use of nuclear, chemical, radiological, or biological weapons.
  • FSPs must comply with international targeted financial sanctions and designations related to TF/PF.

Reporting Obligations

Suspecting an Offense

  • Any person who suspects that someone has committed an offense under these laws must report it to the Financial Reporting Authority (FRA) or the police.
  • Failure to do so is punishable by imprisonment and/or a fine.

Sanctions Compliance

International Sanctions Orders

  • FSPs must comply with international sanctions orders, including those from the United Nations and European Union.
  • They must file suspicious activity reports (SARs), freeze funds, and inform the Governor as required under relevant Acts/orders if they discover a relationship that contravenes applicable sanctions.

Conclusion

Overall, these guidance notes aim to help FSPs in the Cayman Islands understand their obligations and responsibilities in preventing money laundering, terrorist financing, and proliferation financing.