Financial Crime World

Financial Regulations in the Cayman Islands: A Guide to Preventing Money Laundering, Terrorist Financing, and Proliferation Financing

The Cayman Islands have implemented strict financial regulations to prevent money laundering (ML), terrorist financing (TF), and proliferation financing (PF). This guide outlines the key points for Financial Services Providers (FSPs) to follow in order to comply with these regulations.

Money Laundering (ML)

Money laundering refers to the process of disguising the origin of funds obtained through illicit means. Terrorist groups may use legitimate sources or a combination of lawful and unlawful sources to fund their activities. The methods used for laundering include:

  • Cash smuggling
  • Structured deposits
  • Purchases of monetary instruments
  • Credit/debit card transactions
  • Wire transfers

Terrorist Financing (TF)

Charities and non-profit organizations are vulnerable to being misused for TF. Terrorist groups use NPOs to raise and launder funds for terrorism. Underground banking systems, such as the hawala system, have been used to move terrorist-related funds.

Proliferation Financing (PF)

Proliferation financing refers to providing funds or financial services used for manufacturing, acquiring, possessing, developing, exporting, transporting, transferring, stockpiling, or using nuclear, chemical, radiological, or biological weapons and their means of delivery. The Proliferation Financing (Prohibition) Act makes it an offence to provide, receive, or invite instruction on PF.

Reporting Requirements

Any person who believes or suspects that another person has committed an offence under the TA must disclose information to the Financial Reporting Authority or police as soon as reasonably practical. Failure to do so is punishable by imprisonment and/or a fine.

  • Disclose information to the Financial Reporting Authority or police as soon as reasonably practical
  • Provide detailed information about the suspected offence, including the identity of the person involved

Sanctions Compliance

FSPs must comply with international targeted financial sanctions/orders, designations, and directions issued in relation to TF/PF. This includes:

  • Filing suspicious activity reports (SAR)
  • Freezing funds
  • Informing the Governor as required under the relevant Acts/orders

Conclusion

These guidance notes aim to provide clarity on the requirements for Financial Services Providers (FSPs) to prevent and report ML, TF, and PF activities in the Cayman Islands. By following these guidelines, FSPs can ensure compliance with financial regulations and contribute to a safer and more secure financial environment.