Fraud, Asset Training & Recovery 2023 - Cayman Islands (Commercial Dispute Resolution, CDR)

• Published date: 31 May 2023
• Subject Matter: Finance and Banking, Litigation, Mediation & Arbitration, Criminal Law, Financial Services, Arbitration & Dispute Resolution, White Collar Crime, Anti-Corruption & Fraud
• Law Firm: Carey Olsen
• Author: Mr Sam Dawson, Denis Olarou and Peter Sherwood

This guide explores the latest legislative, regulatory and enforcement developments in the Cayman Islands and provides expert analysis on industry-wide topics including the local legal framework, the main stages of a fraud case, parallel proceedings, cross-jurisdictional mechanisms, recent developments, technology and other impacting factors.

1. EXECUTIVE SUMMARY

The Cayman Islands is a leading global financial services industry centre, hosting most of the world's hedge funds by number and by net assets, the second-most captive insurers, and half of the companies listed on the Hong Kong Stock Exchange. Inevitably, such a concentration of financial services activity generates a considerable number of complex disputes, including fraud disputes.

The international nature of the financial services industry and other companies registered in the Cayman Islands necessarily means that fraud litigation is almost invariably cross-border. Sometimes this will be because the assets against which the victim will need to enforce are abroad. Other times, the jurisdiction may play a supporting role in the enforcement of foreign judgments over assets in the Cayman Islands and the preservation of such assets pending the conclusion of foreign proceedings.

Whichever it is, the jurisdiction's judiciary and legal profession are highly experienced in all types of complex cross-border fraud disputes. The Cayman Islands Grand Court has handled some of the biggest and most complex fraud trials, including the AHAB v Al-Sanea trial which concerned claims over US$9 billion, lasted over a year, resulted in a 1,300-page judgment, and has been said to have dealt with one of the largest Ponzi schemes in history.

As described in more detail below, the jurisdiction offers a full suite of discovery, document and asset preservation, and enforcement tools that will be familiar to common law practitioners. The Cayman Islands courts are also used to rendering and obtaining mutual cross-border judicial assistance in appropriate cases. These factors facilitate the successful pursuit of fraudsters in the jurisdiction, whether on a domestic level or as part of a cross-border multi-jurisdictional effort, as is more often than not the case.

2. IMPORTANT LEGAL FRAMEWORK AND STATUTORY UNDERPINNINGS TO FRAUD, ASSET TRACING AND RECOVERY SCHEMES

The legal system of the Cayman Islands is closely related to that of England and the various Commonwealth jurisdictions. Those familiar with such common law jurisdictions will find that, for the most part, they are on familiar ground when it comes to fraud litigation generally, and the business of asset tracing and recovery in particular.

While there may occasionally be some devil in the detail, particularly with many elements of common law in England becoming increasingly codified in statute, the substantive common law causes of action typically utilised by a fraud litigator in England are known to the Cayman Islands legal system.

Similarly, all the classic discovery, document preservation, and asset preservation instruments of the fraud-fighting toolkit, such as Norwich Pharmacal, Anton Piller, Bankers Trust and Mareva orders, are available and the Cayman Islands courts are well versed in their use. In appropriate circumstances, the Cayman Islands courts both issue and honour requests for foreign judicial assistance. Where fraud has resulted in insolvency and the appointment of official liquidators over a Cayman Islands company, this might sometimes open up additional avenues for making recoveries.

Publicly available information

Some information that could be useful in pursuing recoveries is, in fact, publicly available without the need to make any application to the court:

• The list of current directors of every company, whether resident or exempted, is publicly available online.
• The list of shareholders of resident companies is also available for public inspection.
• The land registry records identifying the owner of land and the existence or otherwise of a mortgage over it is open for public inspection.
• The register of aircraft, which shows the registered owner and other information, is publicly available on the Civil Aviation Authority website.
• Vessel transcripts for maritime vessels registered in the jurisdiction are publicly available from the Cayman Islands Shipping Registry website and include information about the current owner. Further information, including previous owners, mortgages and the history of transfers, is available via an in-person inspection at the offices of the Registry.

The list of shareholders of exempted companies is not currently available to the public.

As such, despite the jurisdiction's somewhat romanticised reputation for secrecy, it is sometimes possible to collect useful information in support of a fraud claim before resorting to the assistance of the courts. When the time to seek the courts' assistance does arrive, the applicant will invariably find that the judiciary is highly...