On 19 March 2019, the Caribbean Financial Action Task Force ("CFATF") issued its latest assessment of the Cayman Islands' AML/CTF/CFP regime1 (the "March Report"). The assessment evaluated technical compliance (i.e. having legislation in place) but also, for the first time for the Cayman Islands, evaluated the effectiveness of Cayman Islands legislation.
Whilst the March Report acknowledged the Cayman Islands' high level of commitment to ensure that the AML/CTF framework is robust and capable of safeguarding the integrity of the jurisdiction's financial sector, it also identified gaps in the legislative framework regarding: availability and accuracy of information; interagency coordination and cooperation; international cooperation; and monitoring and enforcement, and provided recommendations on how the regime could be strengthened.
The Cayman Islands is now in a one-year observation period that ends in February 2020.
To ensure a positive outcome, a number of legislative changes are proposed to implement recommended actions in the March Report.
For this purpose and following consultation with Industry, thirteen bills amending existing legislation have been proposed as follows:
- The Companies (Amendment) Bill, 2019
- The Limited Liability Companies (Amendment) Bill, 2019
- Trusts (Amendment) (No. 2) Bill, 2019
- Banks and Trust Companies (Amendment) Bill, 2019
- The Limited Liability Partnership (Amendment) Bill, 2019
- Mutual Funds (Amendment) Bill, 2019
- Insurance (Amendment) Bill, 2019
- Money Services (Amendment) Bill, 2019
- Trade and Business Licensing (Amendment) Bill, 2019
- Building Societies (Amendment) Bill, 2019
- Cooperative Societies (Amendment) Bill, 2019
- The Auditors Oversight (Amendment) Bill, 2019
- Monetary Authority (Amendment) (No. 2) Bill, 2019
The bills will be debated in the Legislative Assembly on 24 July 2019.
Summary of Changes
Of these, the following are noteworthy:
The Companies (Amendment) Bill, 2019
The Companies (Amendment) Bill, 2019 will require that a company's list of current directors is maintained and made available for public inspection at the Companies Registry. Inspections will incur a fee of CI$50/US$61 per company.
The period by which a company is required to notify the Registrar of a change of directors or officers of the company will be reduced from sixty days to thirty days (in line with the notice regimes of other laws of other jurisdictions).
The Bill will also require a company to confirm, in its register of members, the number and category of shares held by each member, whether each relevant category of shares held carries voting rights under the articles of association of the company and whether those rights are conditional. A transitional period of three months is proposed to allow companies time to make any necessary amendments to their registers of members.
The Bill also increases the penalties for failure to comply with beneficial ownership reporting obligations under the Companies Law (2018 Revision).
The Limited Liability Companies (Amendment) Bill, 2019
The Limited Liability Companies (Amendment) Bill, 2019 will require that a list of current managers of each limited liability company is maintained and made available for public inspection at the Companies Registry. The Bill also increases the penalties for failure to comply with beneficial ownership reporting obligations under the Limited Liability Companies Law.
Trusts (Amendment) (No. 2) Bill, 2019
The Trusts (Amendment) (No.2) Bill, 2019 (which applies to both professional trustees and non-professional trustees of Cayman Islands governed trusts both in and outside the Cayman Islands) inserts provisions into the Trusts Law (2018 Revision) requiring trustees to maintain accurate and up to date records in relation to settlors, contributors, beneficiaries, protectors, enforcers, service providers and controlling persons as well as up to date accounting records. It also empowers the Registrar of Trusts to request information where a trustee or controlling person is acting in contravention of the Anti-Corruption Law, the Monetary Authority Law, the Proceeds of Crime Law or the Tax Information Authority Law and to share such information with other competent authorities. It also provides sanctions for failure to comply including fines up to US$120,000.
The Bill empowers Cabinet to make regulations generally for carrying out the purposes of the Trusts Law.
Banks and Trust Companies (Amendment) Bill, 2019
The proposed amendments to the Bank and Trust Companies Law (2018 Revision) are intended to ensure that appropriate transparency measures, in the form of disclosure requirements, are in place for trust structures, effectively requiring trustees to disclose to counterparties when they are acting in their capacity as trustees.
Limited Liability Partnership (Amendment) Bill, 2019
The Limited Liability Partnership (Amendment) Bill, 2019 requires limited liability partnerships to include information on the nature of the partnership interest of each partner in the partnership agreement required to be kept at its registered office and provides for a fee for inspecting the register of partners. It also increases the penalties that apply for failing to comply with beneficial ownership reporting obligations under the Limited Liability Partnership Law.
It is not yet possible to establish limited liability partnerships (it is expected that they will be able to be established by the end of 2019 and Campbells will provide a further update in this regard in due course).
Mutual Funds (Amendment) Bill 2019 and Insurance (Amendment) Bill, 2019
The Mutual Funds (Amendment) Bill, 2019 and Insurance (Amendment) Bill, 2019 sanctions licensees who provide company management services for not maintaining required beneficial ownership information on their clients. It is also mandatory for authorities and other professionals who become aware of this failure to notify the Cayman Islands Monetary Authority.
The Money Services (Amendment) Bill, 2019
The Money Services (Amendment) Bill, 2019 will require money service businesses to monitor their agents' compliance with their anti-money laundering programmes and ensure these businesses meet AML/CFT requirements.
Trade and Business Licencing (Amendment) Bill, 2019
Finally, the Ministry of Commerce has put forward changes to the Trade and Business Licencing Law (2019 Revision) so that the licensing board considers an applicant's compliance with anti-money laundering and counter financing of terrorism legislation before it grants, renews or revokes a licence for any designated non-financial businesses and professions.
The Financial Action Task Force will review the progress made by the Cayman Islands at its June 2020 Plenary to determine if the recommended actions have been taken.
While the changes relate to making certain information more accessible, the Financial Services Ministry has said the changes are not connected to public beneficial ownership registers and made the comment ''the proposed actions coming out of these pieces of legislation do not move the Cayman Islands closer to implementing public registers of beneficial owners and should not be seen as such. Making the list of directors for a company publicly available is a response to a Caribbean Financial Action Task Force recommended action''.
1 The full text of the report can be found here: https://www.cfatf-gafic.org/index.php/home/cfatf-news/549-fourth-round-mutual-evaluation-report-for-cayman-islands.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.