Preventing Money Laundering, Terrorist Financing, and Proliferation Financing in the Cayman Islands
The Cayman Islands Financial Services Commission (FSC) has outlined essential guidance for financial services providers (FSPs) to prevent money laundering, terrorist financing, and proliferation financing. This article provides a summary of these requirements.
Understanding Money Laundering (ML)
Money laundering is a serious offense that involves disguising the origins of funds obtained through illicit means.
- Definition: ML is a crime that involves concealing or disguising the origin of money obtained through criminal activity.
- Reporting Requirements: FSPs must be aware of signs of ML and report any suspicious activities to the Financial Reporting Authority (FRA) or police.
Understanding Terrorist Financing (TF)
Terrorist financing is closely related to money laundering but can also involve legitimate sources of funding.
- Definition: TF involves providing financial support to terrorist organizations, which may use charities, non-profit organizations (NPOs), underground banking systems (such as hawala), and other means to raise and launder funds for terrorism.
- Reporting Requirements: FSPs must be aware of their obligations under international sanctions related to PF and report any suspicious activities to the FRA or police.
Understanding Proliferation Financing (PF)
Proliferation financing involves providing funds or financial services that support the development, production, or acquisition of nuclear, chemical, radiological, or biological weapons.
- Definition: PF is a serious offense that supports the development and use of WMDs.
- Reporting Requirements: FSPs must comply with international targeted financial sanctions/orders, including those implemented through Overseas Orders in Council (e.g., UN and EU sanctions).
- Sanctions Compliance: FSPs must freeze funds and inform the Governor as required under the relevant Acts/orders if they discover a relationship that contravenes any applicable sanctions orders or directions.
Key Reporting Requirements
FSPs must file suspicious activity reports (SARs) if they discover a relationship that contravenes any applicable sanctions orders or directions. Failure to report suspicious activities is an offense punishable by imprisonment and/or fines.
Summary
The Cayman Islands FSC has outlined essential guidance for financial services providers to prevent money laundering, terrorist financing, and proliferation financing. By understanding the definitions, reporting requirements, and sanctions compliance, FSPs can ensure compliance with anti-money laundering, terrorist financing, and proliferation financing regulations.