International financial sanctions are applied against countries
or persons which are deemed to have violated international laws.
These sanctions are imposed with the intention of:
changing the conduct of listed countries or persons;
imposing punitive measures when international peace and
security are threatened and diplomatic efforts have failed;
deterring, preventing or suppressing terrorist acts.
Two of the key international bodies that adopt these
international sanction measures are the United Nations (UN) and the
European Union (EU). Other bodies, such as the Office of Foreign
Assets Control ('OFAC'), also impose sanctions however
these sanctions are beyond the scope of this paper.
Extension to the Cayman Islands
The UK Government passes Orders in Council ("Orders")
which extend UN and EU sanctions to its Overseas Territories. Once
extended in this way, these Orders have the force of law in the
Such orders apply to any person in the Cayman Islands, any
British citizen ordinarily resident in the Cayman Islands and any
entity incorporated or constituted under the laws of the Cayman
Orders generally prohibit persons from dealing with funds owned
or controlled by a designed person unless authorization is obtained
by licence (see below).
Failure to observe these prohibitions may result in ones
conviction for criminal offence thereby rendering one liable to
fines and/or imprisonment.
A defence may be available if the person did not know and had no
reasonable cause to suspect that they were dealing with funds owned
or controlled by a designed person or persons acting on their
Specific obligations of Financial Services Providers
Financial Services Providers are expected, pursuant to the Money
Laundering Regulations (as revised), to have systems and controls
in place to conduct initial due diligence, for ongoing monitoring
and for reporting suspicious activity.
Financial Services Providers should keep up to date with the
relevant sanctions lists. In doing so, FSPs may discover that
certain sanctions are applicable to one or more of their clients,
existing or new.
Pursuant to the Proceeds of Crime Law, the Money Laundering
Regulations and the Terrorism Law FSPs must file a Suspicious
Activity Report to the Financial Reporting Authority if they
discover a relationship that contravenes a sanctions order or a
direction under the Proliferation Financing (Prohibition) Law.
Sanctions in force
A list of sanction orders in force in the Cayman Islands can be
found on the CIMA website. Official sanctions orders applicable in
the Cayman Islands are published in the Cayman Islands Gazette.
In certain circumstances, one can apply for and obtain a licence
under the Restrictive Measures or UN Sanctions (Overseas
Territories) Orders. The respective order should be consulted to
determine if a licence is available. Such licences may allow for
activities that would otherwise be prohibited. Applications can be
made in writing to the Financial Secretary of the Cayman
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.
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