25/02/21

CAYMAN ISLANDS: Jurisdiction on FATF ‘grey list’ over AML compliance.

As published on caymannewsservice.com, Thursday 25 February, 2021.

(CNS): The Cayman Islands has fallen short of the necessary compliance standards and will be under increased observation by the Financial Action Task Force until it fulfills the requirements relating to its international financial obligations. Cayman has been added to the FATF’s grey list because of the failure by the authorities here to enforce the anti-money laundering and beneficial ownership regime and to penalize breaches.

At an online press briefing on Thursday, Dr Marcus Pleyer, the current president of FATF, explained why Cayman had wound up on the list and is now facing this increased level of monitoring. He said that strategic deficiencies had been identified during the mutual evaluation.

“These deficiencies are… in the area of sanctions on financial institutions for anti-money laundering breaches,” Pleyer said, which was the first area where Cayman must improve. The second was with regard to beneficial owners. “They must show that they penalize those that don’t show accurate up to date beneficial ownership information,” the president added.

Pleyer described these as two crucial issues and FATF expected higher risk countries such as the Cayman Islands, which is a major financial centre, to have “commensurate measures” in place against these risks.

The FATF’s grey list includes just 18 other countries, the Cayman Islands being the only overseas territory on the list.

The Cayman Islands will now be required to work to implement an agreed action plan, applying sanctions that are effective, proportionate and dissuasive, and taking administrative penalties and effective enforcement actions in a timely manner. Cayman will also be required to impose adequate and effective sanctions to deal with inadequate beneficial ownership information and to demonstrate prosecutions against all types of money laundering in line with the jurisdiction’s risk profile.

In a press release, government officials said it was found to have met 60 out of 63 recommended actions but it was required to work with FATF now to swiftly address the outstanding deficiencies, which has provided an action plan for the Cayman Islands.

Premier Alden McLaughlin played down the gaps identified and said that Cayman was making progress, but it is clearly a major issue that the next government will need to address to avoid reputational damage.

“The three remaining recommended actions are about the continuing effectiveness of our legal framework, in terms of compliance and enforcement in detecting and deterring financial crime, and recent work by our agencies substantiates our progress in these areas,” he said. “For many years, government and Cayman’s private sector have worked together to address the ever-evolving local and global risk of financial crime.”

The Caribbean Financial Action Task Force (CFATF), the regional body that monitors Caribbean members, published 63 recommended actions for Cayman two years ago and it has largely complied with them.

Attorney General Samuel Bulgin, who is the chairman of the Cayman Islands Anti-Money Laundering Steering Group, argued that the country’s response has been robust. “Prior to the CFATF report in March 2019, our public and private sectors continued to address the FATF standard through updated legislative, regulatory and law enforcement measures,” he said. “Government’s commitment today reaffirms the priority that the Cayman Islands continues to place upon meeting global AML standards.”

Meanwhile, according to the Caribbean Financial Action Task Force Review, Cayman has also seen its compliance regarding its virtual asset regime downgraded from largely compliant to only partially compliant.