The Ministry of Financial Services has prepared four Bills that improve Cayman's regulatory framework, in support of the international financial system's integrity.

These Bills, which have the support of industry, will be heard at the next sitting of the Legislative Assembly in October. They are intended to maintain the jurisdiction's adherence to international standards, and prepare Cayman for the Caribbean Financial Action Task Force's (CFATF) mutual evaluation process in 2017.

The CFATF is a regional body that is styled after the Financial Action Task Force (FATF). The FATF sets the global standard for legal, regulatory and operational measures against money laundering, terrorist financing and the proliferation of weapons of mass destruction – collectively and commonly referred to as 'AML/CFT'.

In order to continue adhering with international standards, the Ministry's Bills are intended to provide for greater powers for law enforcement and regulatory agencies, including their abilities to administer administrative penalties and more effectively cooperate with their international counterparts. Greater clarity is also introduced as to the types of businesses that have a responsibility to adhere to the international standards.

The Bills are the Monetary Authority (Amendment) Bill, 2016; the Non-Profit Organisations Bill, 2016; the Auditors Oversight (Amendment) Bill, 2016; and the Companies Management (Amendment) Bill, 2016.

The Monetary Authority (Amendment) Bill, 2016: This Bill would allow the Cayman Islands Monetary Authority (CIMA), which regulates the financial services industry, to implement an administrative fines regime as a mechanism to ensure industry's compliance with Cayman's regulatory laws and AML/CFT regime.

Under the Bill, CIMA would develop the regulations for these administrative fines, in conjunction with the Ministry and industry; Cabinet approval would be necessary for these regulations to take effect. The minimum and maximum amounts have been outlined in the Bill, and the process by which an administrative sanction is imposed would be addressed through the regulations to be developed.

This Bill would satisfy the FATF's requirement that countries should ensure the availability of a range of effective, proportionate and dissuasive sanctions, whether criminal, civil or administrative.

The Non-profit Organisations Bill, 2016: This Bill seeks to establish a register for all non- profit organisations (NPOs) in the Islands. It defines an NPO as a company or body of persons, whether incorporated or unincorporated, or a trust, that is:

  • established, or which identifies itself, as established primarily for the promotion of charitable, philanthropic, religious, cultural, educational, social or fraternal objectives, or other activities or programmes for the public benefit or a section of the public within the Islands or elsewhere; and
  • which solicits contributions from the public or a section of the public within the Islands or elsewhere.

The NPO register and system is intended to meet the FATF requirement that countries know the NPOs that are operating in the country, and also monitor those NPOs that represent the largest portion of the industry, in order to protect against terrorist financing.

However, as proposed in the Ministry's Bill, the register also would provide several benefits to the Cayman Islands community. It would ensure that the public has access to information on all NPOs; allow for easy identification of entities that have been registered as NPOs; and facilitate investigations of, and enforcement against, bad actors within the NPO sector.

Furthermore, the Bill would streamline and quicken the registration process for NPOs, so that registration would occur within a maximum of 30 days; and allow changes to be filed by notice to the designated registrar.

The Ministry will conduct a public education campaign for the Non-profit Organisations Bill, 2016, in the near future.

The Auditors Oversight (Amendment) Bill, 2016: This Bill adds two categories of audits under the supervision of the Auditors Oversight Authority (AOA).

The first new category relates to auditors who wish to 'opt-in' to be supervised by the AOA. For example, a Cayman Islands audit firm may choose to be supervised by the AOA, instead of by an equivalent overseas authority. The second new category would give the AOA the flexibility to expand its scope of supervision to other auditors, if warranted by further international regulatory changes.

This Bill also would permit the AOA to cooperate with equivalent overseas authorities – and similarly to the Monetary Authority (Amendment) Bill, 2016 – it includes a provision to introduce regulatory-making power to allow for an administrative penalty regime, and stipulates the maximum penalty.

Currently, the Auditors Oversight Law charges the AOA with the supervision of auditors who audit the financial statements of market-traded companies from, or within, the Cayman Islands.

The Companies Management (Amendment) Bill, 2016: This Bill proposes several amendments that would remove references to bearer shares in The Companies Management Law. This follows the abolishment of bearer shares earlier this year that was accomplished through The Companies (Amendment) Law, 2016.

In addition to the Ministry of Financial Services' Bills, both the Ministry of Finance and the Attorney General's Chambers will have Bills before the Legislative Assembly that relate to the CFATF mutual evaluation process.

The complete list of CFATF-related Bills, which are available at the Legislative Assembly and on the Cayman Islands Gazette website, are:

  • Auditors Oversight (Amendment) Bill, 2016
  • Companies Management (Amendment) Bill, 2016
  • Customs (Amendment) Bill, 2016
  • Monetary (Amendment) Bill, 2016
  • Non-Profit Organisations Bill, 2016
  • Police (Amendment) Bill, 2016
  • Proliferation Financing (Prohibition) (Amendment) Bill, 2016
  • Proceeds of Crime (Amendment) Bill, 2016
  • Judicature (Amendment) Bill, 2016
  • Penal Code (Amendment) Bill, 2016
  • Criminal Procedure Code (Amendment) Bill, 2016
  • Terrorism (Amendment) Bill, 2016

The Cayman Islands is a member of the Caribbean Financial Action Task Force (CFATF), which will conduct a mutual evaluation of the Cayman Islands' Anti Money-Laundering/Counter- Financing of Terrorism (AML/CFT) regime in 2017.

While previous mutual evaluations focused primarily on technical compliance, these evaluations will place greater emphasis on the actual effectiveness of the AML/CFT framework. Adherence to the international standard, as set by the Financial Action Task Force (FATF), is key to Cayman's reputation as an international financial centre.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.