Back In The Spotlight ' Beneficial Ownership Regime In The Cayman Islands

• Published date: 24 January 2023
• Subject Matter: Finance and Banking, Government, Public Sector, Criminal Law, Compliance, Financial Services, Terrorism, Homeland Security & Defence, Money Laundering, White Collar Crime, Anti-Corruption & Fraud
• Law Firm: Carey Olsen
• Author: Mr Anthony McKenzie, Eng How Cheow, Rebecca Lee and Wei Xun Toh

Cayman companies are required to maintain beneficial ownership information in line with international standards to combat money laundering, tax evasion and terrorist financing.

Governments and authorities worldwide are placing increased emphasis on stricter financial controls tackling money laundering, terrorist financing and proliferation of weapons trafficking. As a leading global financial hub, the Cayman Islands is at the forefront of this arduous challenge.

An example of its success is the introduction of a rigorous beneficial ownership regime (BOR). Under its BOR legislation, which came into force in 2017, the following types of entities must establish and maintain a register of beneficial ownership, unless exemptions apply:

1. Companies incorporated or registered by way of continuation under the Companies Act (as revised);
2. Limited liability companies formed under the Limited Liability Companies Act (as revised); and
3. Limited liability partnerships formed under the Limited Liability Partnership Act (as revised).

The register must record details of beneficial owners of each entity at its registered office, with such information accessible by a competent authority, but not available publicly.

KEY UPDATES

In February 2021, the global money laundering and terrorist financing watchdog called the Financial Action Task Force (FATF) acknowledged that the Cayman Islands had met 60 out of 63 of its recommended actions, rating compliant or largely compliant with 39 out of 40 of the Caribbean FATF's technical compliance points. However, the FATF placed the Cayman Islands on its "grey list" under increased monitoring for certain high-risk areas of compliance.

Subsequently, the European Commission (EC) also placed the Cayman Islands on its anti-money laundering blacklist, citing beneficial ownership information as an area requiring continual work; namely, that adequate and effective sanctions should be imposed in cases where relevant parties (including legal persons) do not file accurate, adequate and up-to-date information.

The Cayman Islands reacted to this scrutiny by introducing updated guidelines on its BOR legislation, imposing significant penalties on those not compliant with the requirements. Such efforts demonstrate that the jurisdiction is willing to adapt, and is committed to the global cause of high standards in fighting financial crime.

In October 2022, the FATF recognised that the Cayman Islands had satisfied two additional recommended actions...