Countries/Jurisdictions of Primary Concern - Cayman Islands
The Cayman Islands, a UK Caribbean overseas territory, is an offshore financial center. Most money laundering that occurs in the Cayman Islands is primarily related to foreign criminal activity and involves fraud, tax evasion, and drug trafficking, largely cocaine. The offshore sector is used to layer or place funds into the Cayman Islands financial system. Due to its status as a zero-tax regime, the Cayman Islands is also considered attractive to those seeking to evade taxes in their home jurisdictions.
The Cayman Islands is home to a well-developed offshore financial center that provides a wide range of services, including banking, structured finance, investment funds, various types of trusts, and company formation and management. As of June 30, 2015, the banking sector had $1.398 trillion in international assets. As of September 2015, there are 193 banks, 151 trust company licenses, 118 company managers and corporate service providers, 740 captive insurance companies, six money service businesses, and almost 100,000 companies licensed or registered in the Cayman Islands. According to the Cayman Islands Monetary Authority, as of September 2015 there are approximately 11,215 mutual funds, of which 7,889 are registered, 2,830 are master funds, 395 are administered, and 101 are licensed. Shell banks are prohibited, as are anonymous accounts. Bearer shares are generally issued by exempt companies and must be immobilized.
Gambling is illegal. The Cayman Islands does not permit the registration of offshore gaming entities. The authorities do not see risks from bulk cash smuggling related to the large number of cruise ships that dock in the jurisdiction. Cayman Enterprise City, as a Special Economic Zone (SEZ), was established in November 2011 for knowledge-based industries, primarily Internet & Technology, Media & Marketing, Commodities & Derivatives, and Biotechnology. A potential area of vulnerability is in the commodities and derivatives sphere.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: http://www.state.gov/j/ct/rls/crt/
Do FINANCIAL INSTITUTIONs engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or illegal drug sales that otherwise significantly affect the U.S.: NO
criminalizATION OF money laundering:
“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes
Are legal persons covered: criminally: YES civilly: YES
Know-your-customer (KYC) rules:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: YES
KYC covered entities: Banks, trust companies, investment funds, fund administrators, securities and investment businesses, insurance companies and managers, money service businesses, corporate and trust service providers, money transmitters, dealers of precious metals and stones, and the real estate industry
Number of STRs received and time frame: 568: July 1, 2014 – June 30, 2015
Number of CTRs received and time frame: Not applicable
STR covered entities: Banks, trust companies, investment funds, fund administrators, securities and investment businesses, insurance companies and managers, money service businesses, corporate and trust service providers, money transmitters, dealers of precious metals and stones, and the real estate industry
money laundering criminal Prosecutions/convictions:
Prosecutions: 2: January 1 – October 31, 2015
Convictions: 2: January 1 – October 31, 2015
Records exchange mechanism:
With U.S.: MLAT: YES Other mechanism: YES
With other governments/jurisdictions: YES
The Cayman Islands is a member of the Caribbean Financial Action Task Force (CFATF), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.fatf-gafi.org/topics/mutualevaluations/documents/mutualevaluationofthecaymanislands.html
Enforcement and implementation issues and comments:
In 2015, the Cayman Islands released a draft money laundering self-risk assessment. The findings included outdated AML/CFT laws and regulations, weak supervision of nonprofits and non-financial organizations, and insufficient international cooperation.
The Cayman Islands Legislative Assembly passed the Proceeds of Crime (Amendment) Law 2015 on April 17, 2015. This amendment repeals section 5(1)(b) of the Proceeds of Crime Law (2014 Revision), replacing the Financial Secretary with the Chief Officer in the Ministry responsible for Financial Services, or the Chief Officer’s designate, as a member of the Anti-money Laundering Steering Group.
The Department of Commerce and Investment now supervises real estate agents and precious metal dealers. The Government of the Cayman Islands reports that AML/CFT supervision will be enhanced for designated non-financial businesses and professions (DNFBPs) that trade or store precious metals and stones and financial derivatives and when trades occur within the SEZ. A Special Economic Zone (Amendment) Bill is expected to be presented to the Legislative Assembly in early 2016. The bill will allow for stronger due diligence and will authorize the Special Economic Zone Authority to request beneficial ownership information.
In 2015, the Financial Reporting Authority (FRA), the financial intelligence unit, cooperated with the United States on two cases regarding ongoing corruption investigations involving FIFA officials, which include several million dollars of fraud and money laundering schemes by entities with overseas connections. This has resulted in assets of the entities being reported frozen in various jurisdictions.
The Cayman Islands continues to develop its network of tax information exchange mechanisms and has a network of 36 signed information exchange agreements, with 29 in force. Pursuant to legislation and intergovernmental agreements, the Cayman Islands exchanged tax information with the United States in 2015, and will exchange information with the United Kingdom in 2016.
As a UK overseas territory, the Cayman Islands cannot sign or ratify international conventions in its own right. Rather, the UK is responsible for the Cayman Islands’ international affairs and may arrange for the ratification of any convention to be extended to the Cayman Islands. The 1988 UN Drug Convention was extended to the Cayman Islands in 1995. The UN Convention Against Transnational Organized Crime was extended to the Cayman Islands in 2012. The UN Convention against Corruption has not yet been extended to the Cayman Islands; however, the full implementation platform for the anti-corruption convention exists under current Cayman law. A 2002 request for extension of the International Convention for the Suppression of the Financing of Terrorism to the Cayman Islands has not yet been finalized by the UK, although the provisions of the convention are implemented by domestic laws.
The Cayman Islands reportedly is considering changes to its AML/CFT regime, including incorporating a risk-based approach in money laundering regulations; implementing a supervisory framework for DNFBPs and non-profit organizations, imposing administrative penalties for financial and DNFBP supervisors; incorporating tax crimes as a money laundering offense under the Proceeds of Crime Law; and increasing human resources for the FRA and the Financial Crimes Unit of the Royal Cayman Islands Police Service. The government should take steps to adopt and implement these items. The Government of the Cayman Islands decided to continue its current non-transparent method when it comes to disclosing beneficial ownership information. The government should set up a public central register to bring together this information to facilitate access by law enforcement.