Blog: Q&A: Offshore AML regulation and enforcement — Financier … – Financier Worldwide

FW: To what extent are financial crimes, including money laundering, growing in frequency and complexity? How would you summarise recent trends in this area?

Smyth: The threat posed to the international financial system as a result of financial crime, including money laundering, is a global problem requiring effective financial crime risk management. As a founding member of the Caribbean Financial Action Task Force, the Cayman Islands has a longstanding commitment to anti-money laundering (AML) and countering the financing of terrorism (CFT) and a deeply rooted compliance culture. The Cayman Islands has made noteworthy progress in financial crime risk management building on years of good work by local government investigating and prosecuting cross-border money laundering cases. The financial crime investigation unit which is part of the Royal Cayman Islands Police Service works with other Cayman Islands entities, including the Financial Reporting Authority (FRA) and the Cayman Islands Monetary Authority (CIMA), to protect the Cayman Islands from financial crime.

FW: In your experience, what are the main types of financial crime that organisations are encountering in the Cayman Islands?

Smyth: Financial crime prevention is an important issue for the Cayman Islands government, which has implemented mitigating measures through the following regimes: AML/CFT compliance, economic substance, beneficial ownership and tax reporting compliance via the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS). Each of these regimes has helped to minimise the threat of financial crimes within the Cayman Islands.

FW: How would you describe recent regulatory and enforcement trends in the fight against money laundering? What efforts are being made to strengthen offshore frameworks?

Smyth: CIMA applies a risk-based approach to its AML/CFT supervisory framework. CIMA’s risk-based approach reflects the 2021 Cayman Islands national risk assessment of its money laundering, terrorist financing and proliferation financing risks, which is designed to draw from its experience of its first national risk assessment conducted in 2015 and to assist financial institutions, designated non-financial businesses and virtual asset service providers with assessing their own risks. As part of its supervisory activities, CIMA carries out AML/CFT inspections. Enforcement action to strengthen CIMA’s regulatory framework has resulted in fines being imposed against financial service providers (FSPs) from across the financial services industry for contravening AML regulations. To date, CIMA has imposed nine fines against FSPs for breaches of the AML regulations. In November 2022, the Grand Court of the Cayman Islands imposed an order on a mutual fund administrator licence holder to pay CIMA $5.1m for breaches of AML regulations.

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