GEORGE TOWN, Cayman Islands (CNS) – The financial services industry in the Cayman Islands is bracing itself for another rocky year, as this jurisdiction could be included on the European Union’s list of high-risk third countries for money laundering that pose significant threats to the financial system of the Union.
The EU updated its anti-money laundering list earlier this month in line with the grey list of jurisdictions whose AML practices are under increased monitoring by the Financial Action Task Force.
Officials told CNS that the listing, which will prohibits the use of special purpose vehicles in EU AML listed high-risk third countries, was being addressed and Cayman is intent on being removed from this list. When that will happen is unclear but it will not be before the end of the year.
In a statement from the financial services ministry, officials said the Cayman Islands government was committed to working with the international standard-setter on implementing an action plan to address any outstanding issues.
In March 2019 the FATF recommended 63 actions for the Cayman Islands to complete to close gaps in its AML regime. While officials claim that 60 of these actions have been completed, the FATF nevertheless placed Cayman on its monitoring list and gave it an action plan to complete the remaining three important items.
The EU listing will impact a small amount of business here. Although Cayman remains on the FATF list, officials said this would not affect Cayman Islands investment funds from being marketed in the EU. However, if proposed AIFMD amendments are enacted in 2024 as expected, this would prevent those funds from being marketed in the EU.
The immediate EU listing will, in accordance with the EU Securitisation Regulation, prohibit EU financial institutions from using Cayman Islands entities for securitisations. But officials said that minister André Ebanks is in direct contact with the Cayman Islands’ leading industry practitioners in this sub-sector to provide appropriate updates and guidance for the area of business that will be negatively impacted.
The listing will require all financial institutions to conduct enhanced due diligence on business relationships and transactions involving non-EU listed jurisdictions. This may include obtaining additional information on customers, beneficial owners, and the source of funds and wealth; and selecting patterns of transactions that need further examination.