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CIMA’s Prior Approval Required for Director and Senior Officer Appointments

In the Cayman Islands, all director and senior officer appointments at licensed banks must receive prior approval from the Cayman Islands Monetary Authority (CIMA). This requirement is outlined in Section 3 of the Banking Transactions and Company Act (BTC Act).

Assessing Fitness and Propriety

To assess the fitness and propriety of individuals for these roles, CIMA considers several key criteria, including:

  • Honesty
  • Integrity
  • Reputation
  • Competence
  • Capability
  • Financial soundness

Prior to appointment, proposed directors and senior officers will need to complete a CIMA personal questionnaire and provide supporting documentation, including:

  • A resume
  • Notarized evidence of identity
  • At least two character references
  • One financial reference
  • A police clearance certificate or affidavit of no convictions

Authorized Agents

Licensed banks in the Cayman Islands are required to maintain a place of business in the territory or have their registered office situated at a Class A bank or trust company. In either case, they must appoint at least two individuals resident in the Cayman Islands as authorized agents.

Banking Names

When selecting a name for a licensed bank, care must be taken to avoid names that suggest banking activities without approval from CIMA. Additionally, names that are identical to those of existing banks or could be confused with them may also require special permission.

Annual Review and On-Site Inspections

To ensure compliance with regulatory requirements, authorized agents should regularly visit CIMA to discuss the affairs of their licensed bank. On-site inspections outside the Cayman Islands may also be conducted by CIMA, for which reasonable out-of-pocket expenses may be reimbursed.

Changes in Operations

Any changes to a licensed bank’s scope or type of activity will require an amendment to its business plan and may necessitate a review of its license status. It is essential that institutions consult with legal counsel before making any significant changes to their Cayman Islands operations.

Administrative Fines Regime

CIMA has the power to impose administrative fines on persons or entities for breaches of anti-money laundering regulations or certain prescribed provisions of regulatory acts. The fines are categorized as:

  • Minor
  • Serious
  • Very serious

and may be imposed in accordance with the Monetary Authority (Administrative Fines) Regulations.

Economic Substance Requirements

The International Tax-Coordination (Economic Substance) Act requires in-scope entities that carry on particular activities to demonstrate economic substance in the Cayman Islands. Relevant entities include:

  • Most exempted companies
  • LLCs
  • LLPs
  • Registered foreign companies
  • Partnerships

Before applying for a license or making changes to business activities, an analysis should be undertaken to determine:

  • Classification
  • Reporting requirements
  • Substance requirements under this act.

Read more about these requirements in our client briefing: Cayman Islands economic substance requirements.