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:
- Companies incorporated or registered by way of continuation under the Companies Act (as revised);
- Limited liability companies formed under the Limited Liability Companies Act (as revised); and
- 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.
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, specifically on effective supervisory sanctions and on beneficial ownership, bringing the tally to 62 out of 63 with its endeavours.
The Cayman Islands is now close to being removed from the grey list once the final FATF recommended action on money laundering investigations and prosecutions is met. Assuming positive progress continues, it is expected that the Cayman Islands will be removed from the EC’s blacklist once removed from the FATF grey list.
Without repeating the BOR mechanism in detail, it is useful to bear in mind certain important information, given the latest developments resulting from heightened compliance obligations.
1) Duty to file meaningful data. Entities are obliged to maintain accurate, adequate and up-to-date information, including giving notice (as soon as reasonably practicable) should any information result in a change to its register. Required particulars to be entered in relation to each registrable person are:
- Full legal name;
- Residential address and, if different, address for service of notices;
- Date of birth;
- Information identifying the individual from their unexpired and valid passport, driver’s licence or other government-issued document, including identifying number, country of issue and date of issue and expiry, and
- The date on which the individual became or ceased to be a registrable person in relation to the relevant in-scope entity.
Relevant legal entity
- Corporate or firm name;
- Registered or principal office;
- Legal form of the entity and law by which it is governed;
- If applicable, the register of companies in which it is entered and its registration number in that register; and
- The date on which it became or ceased to be a registrable person in relation to the relevant in-scope entity.
These guidelines have been created in response to FATF requirements, on one hand complying with the recommended actions and, on the other, not imposing an excessive onus of disclosure.