This short guide, forming part of McGrath Tonner's financial sanctions series, deals with the financial sanctions regime in force, at the date of writing, in the Cayman Islands.

What follows is an overview of the standard exemptions and licensing grounds found in Cayman Islands financial sanctions legislation. It is important to bear in mind that the grounds may vary from regime to regime, so it is necessary to check the relevant, up-to date legislation for each case.

Exemptions and licensing permissions can allow otherwise prohibited transactions to take place. A licence is a written authorisation from the Governor of the Cayman Islands, with the consent of the UK Secretary of State, permitting an otherwise prohibited act. An exemption to a prohibition applies automatically in certain defined circumstances and does not require a licence from the Governor.

Crediting frozen accounts

Asset freezing legislation generally permits the making of payments into a frozen account without the need for a licence from the Governor, provided those funds are frozen once being paid in:

  • any interest or earnings on the account; or
  • any payments due to a designated person under contracts, agreements or obligations that were concluded or arose before the date the person became sanctioned.

In such cases, the payment should be notified to the Governor without delay

Licensing overview

The Governor may grant licences to allow exceptions to an asset freeze. If a licence is being granted under an Overseas Territories Order in Council ('OOIC'), the Governor must obtain the consent of the UK Secretary of State; whereas a licence issued pursuant to the Terrorism Act ('TA') requires the Governor to consult with the UK Secretary of State.

The Governor can only issue licences where there are specific and relevant licensing grounds to do so, and where the specific conditions have been met. The available grounds can be found in the legislation underpinning each financial sanctions regime.

The Governor may also attach conditions to a licence. Licence conditions are designed to ensure that funds or economic resources can be made available to designated persons in a way that mitigates risk. Without such conditions, it might not be possible to licence certain activity. The conditions that apply to licences reflect two broad policy objectives:

  • to ensure that designated persons do not have access to large amounts of cash, which can be diverted to prohibited activity, such as terrorism;
  • to ensure that there is a reasonable audit trail such that the Governor can monitor compliance with the terms of the licence.

A licence will normally contain strict reporting conditions. A failure to comply with these reporting requirements may result in the revocation, suspension or termination of a licence or further restrictions being included in it. It may also result in criminal prosecution.

A licence will not be issued retrospectively, and the granting of a licence will be considered on a case-by-case basis. One must not assume that a licence will be granted nor must one engage in activities prohibited by financial sanctions unless and until a licence has been granted.

A person commits a criminal office if they deal with funds that should be frozen or make economic resources available to a designated person without an appropriate licence. It is also an offence to knowingly or recklessly provide false or misleading information in a licence application. Any license granted on a false premise is void ab initio.

Licensing grounds

  1. Overseas Orders in Council (OOIC)

Some common licensing grounds for obtaining a licence in the Cayman Islands are for:

  • basic expenses of the designated person or dependent family members;
  • reasonable professional fees and disbursements of incurred expenses in relation to legal services;
  • fees or service charges for the maintenance of frozen funds or economic resources;
  • extraordinary expenses;
  • obligations under a contract entered into or an obligation which arose prior to the designated person of the person in question.
  1. Terrorism Act

The TA contains a broad licensing ground such that the prohibitions in the TA do not apply to anything done under a licence granted by the Governor.

Applying for a licence

An applicant must provide evidence to support an application and demonstrate that all criteria of the relevant licensing grounds have been met. A completed application is one where all the information is received that would enable a decision to be made about whether there is a legal basis to grant a licence. Incomplete applications will be sent back, or additional information will be requested, until the Governor is satisfied that the application can be considered complete.

The Financial Reporting Authority ('FRA') guidance anticipates that a licence application will be considered within 4 weeks of receipt of the completed application, however this does not mean that a licence will necessarily be issued within 4 weeks and in practice the timeline is longer. At the time of writing, the FRA will apply to the UK Secretary of State within around 6 weeks of receipt of the completed application.

Urgent Cases

The Governor will prioritise urgent and humanitarian cases. Such matters must be clearly specified in the application and must be supported by detailed reasoning and evidence.

The Governor will try to assist applicants that contact him to understand the licensing process as well as the evidentiary requirements, however the Governor cannot provide legal advice. Applicants are strongly advised to take independent legal advice before applying for any license.

Submitting a licence application

Applicants will be required to provide:

  • the licensing ground(s) being relied upon in the application;
  • an explanation as to why the licencing ground(s) applies on the facts of the particular case;
  • full information on the parties involved in the proposed transaction:
    • details of the designated person(s)
    • any financial institution(s) involved (e.g., remitter, correspondent, beneficiary)
    • the ultimate beneficiary of the transaction
  • the complete payment route including account details
  • the amount (or estimated amount) of the proposed transaction

Notification and approvals

When a licence is granted, varied or revoked, the Governor will give written notice to the person, category of persons or entity. In cases involving a general licence or licence granted to a category of persons, the Governor shall take such steps as deemed appropriate to publish the grant, variation or revocation of the licence.

If the Governor refuses to issue a licence, the proposed transaction or activities will not be lawful. The Governor will write to the applicant giving reasons for refusing the application. The Governor may also refuse an application if the applicant does not require a licence for the proposed transaction or activities (e.g., an exception applies).

If an application for a licence is refused, the applicant has the following options:

  • appeal to the Governor to review his decision
  • re-apply with new or supplementary evidence or new supporting arguments
  • seek to judicially review the decision

Under the TA, an applicant can apply to the Grand Court for a review of the decision.


Exemptions and licensing permissions can allow otherwise prohibited transactions to take place. As such, they are very important features of the Cayman Islands sanctions scheme. Applicants are, however, strongly advised to take independent legal advice. Persons wishing to avail themselves of any potential exemptions must satisfy themselves that they are on a sure footing given the criminal penalties that may apply. The Cayman Islands authorities scrutinise license applications thoroughly and persons render themselves liable to prosecution if misleading information is submitted.

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.