Answer ... The Cayman Islands has established a sophisticated anti-money laundering regime, which is set out in:
- the Proceeds of Crime Law;
- the Anti-money Laundering Regulations;
- the Proliferation Finance (Prohibition) Law;
- the Terrorism Law;
- the Guidance Notes on the Prevention and Detection of Money Laundering and Terrorist Financing in the Cayman Islands; and
- the Financial Account Tax Compliance Act and Common Reporting Standard and related reporting and information-sharing regimes.
The Proceeds of Crime Law is generally applicable to all Cayman Islands entities and requires them to take certain steps in relation to the prevention of money laundering and terrorist financing, including the imposition of various penalties for non-compliance. The Proceeds of Crime Law requires businesses carrying on ‘relevant financial business’ to comply with the broader Cayman anti-money laundering regime. Relevant financial business is broadly defined to cover a range of activities – those most relevant to the fintech sector include:
- money or value transfer services;
- issuing and managing means of payment (eg, credit and debit cards, cheques, traveller’s cheques, money orders and bankers’ drafts, electronic money);
- individual and collective portfolio management advice;
- the conduct of securities investment business;
- otherwise investing, administering or managing funds or money on behalf of other persons; and
- providing virtual asset services.
An entity subject to the Cayman anti-money laundering regime is required to implement comprehensive risk-based know your customer and anti-money laundering policies, procedures and controls appropriate to the nature and scale of the business.
Certain types of fintech operators that that fall within the scope of the Cayman anti-money laundering regime (eg, a wallet provider, a crypto exchange or another form of virtual asset service provider) may experience tension between their regulatory requirement to have detailed customer know your customer on hand and the pseudo-anonymous nature of their potential client base.