More laws coming to address CFATF criticisms

(CNS): Government is bringing another batch of laws relating to the offshore sector when the Legislative Assembly meets later this month. Most of the bills are designed to enhance the existing anti-money laundering and counter financing of terrorism (AML/CFT) regime and to meet the criticisms contained in the latest report by the Caribbean Financial Action Task Force (CFATF), which raised numerous concerns about this jurisdiction’s vulnerability to financial crime.

Some of eleven pieces of offshore sector related legislation require disclosure of more information about those running the relevant entities and making company directors’ names public. However, officials at the financial services ministry have denied that this relates to any preparations to implement the controversial public beneficial ownership register.

Government has consistently said it will resist the impending order-in-council by the UK to introduce a public register of all the people that own companies and other financial entities domiciled in Cayman until it becomes a global standard. However, some of this current legislation will require offshore companies to be much more transparent.

In a statement responding to media requests, ministry officials said, “The proposed actions coming out of these pieces of legislation do not move the Cayman Islands closer to implementing public registers of beneficial owners and should not be seen as such. Making the list of directors for a company publicly available is a response to a Caribbean Financial Action Task Force recommended action.”

Explaining the legislation more broadly, Financial Services Minister Tara Rivers, who is bringing ten of the bills, said the laws, when passed, will strengthen the AML/CFT regime.

“The government is committed to addressing the recommendations outlined in the CFATF fourth round mutual evaluation report to further cement our standing as a responsible and responsive jurisdiction in the global fight against money laundering and terrorist financing,” she said.

The report recommended the steps Cayman needs to take to address the various deficiencies identified, and the jurisdiction is now under a year-long observation period by the FATF, which ends in February next year, giving the authorities time to write and implement the necessary laws and regulations. Officials said that the FATF will review the progress made by Cayman in June 2020.

“If the degree and quality of progress made by the Cayman Islands do not satisfy the recommended actions, the FATF will issue a public statement regarding the jurisdiction’s AML/CFT deficiencies, develop an action plan, and monitor progress against the action plan,” ministry officials added.

Work has already begun on the laws needed and the premier recently warned that government would need to spend a lot of money addressing what he described as an unfavourable report.

The AML/CFT-related bills expected to be considered by the Legislative Assembly are:

• The Banks and Trust Companies (Amendment) Bill, 2019 is intended to ensure that appropriate transparency measures, such as disclosure requirements, are in place for trusts. For the purpose of Basel II, Pillar 3 Market Disclosures, the bill also would empower CIMA to require a licensee holding a licence, in order to establish a banking business or a Cayman banking group, to make public disclosures.
• The Trusts (Amendment) (No. 2) Bill, 2019 seeks to insert provisions into the Trusts Law (2018 Revision) that: require trustees and the Registrar of Trusts to share information on registered trusts with other competent authorities; provide sanctions for failure to provide competent authorities with required information; and empower Cabinet to make regulations.
• The Companies (Amendment) Bill, 2019 is intended to require a company’s basic information, including a list of directors, to be maintained and publicly available. The bill also puts forward stiffer penalties for failure to comply with beneficial ownership obligations under the law.
• The Limited Liability Companies (Amendment) Bill, 2019 would ensure that all basic information, including a list of directors, for limited liability companies (LLCs) is publicly available. The bill also would impose sanctions to companies for failure to maintain up-to-date information.
• The Limited Liability Partnership (Amendment) Bill, 2019 is similar to the companies and LLC bills as it would require all basic information on a limited liability partnership (LLP) to be available at the LLP’s registered office. The bill also puts forward stiffer sanctions for failure to maintain up-to-date beneficial ownership information.
• The Mutual Funds (Amendment) Bill, 2019 and the Insurance (Amendment) Bill, 2019 would sanction licensees, who also provide company management services, where they fail to maintain current beneficial ownership information for their clients. The mutual funds bill also calls for auditors and other professionals who become aware of this failure to notify the relevant authority.
• The Building Societies (Amendment) Bill, 2019 and the Cooperative Societies (Amendment) Bill, 2019 would prevent persons from holding (or being the beneficial owner of) a significant controlling interest, or holding a management function, in a financial institution if they are suspected of criminal activity.
• The Money Services (Amendment) Bill, 2019 would require money service businesses to monitor their agents’ compliance with their AML/CFT programmes and ensure these businesses meet AML/CFT requirements.
• Cayman’s AML/CFT regime would also be affected by the Trade and Business Licensing (Amendment) Bill, 2019, being put forward by the Ministry of Commerce, to amend the Trade and Business Licensing (TBL) Law to require the TBL Board to consider an applicant’s compliance with AML/CFT obligations before licences are granted, renewed or revoked.

Outside of the AML/CFT-related bills, this month’s LA meeting will debate:

• The Auditors Oversight (Amendment) Bill, 2019 seeks to amend the financial year of the Auditors Oversight Authority Law (2017 Revision) to align with the financial year in the Public Management Finance Law (2018 Revision) and remove inconsistencies.
• The Monetary Authority (Amendment) (No.2) Bill, 2019 also seeks to amend the financial year in the Monetary Authority Law (2018 Revision) to align with the financial year in the Public Management Finance Law (2018 Revision) and eliminate inconsistencies. In addition, the bill proposes to authorise CIMA as the facilitator of business continuity and disaster recovery, following a natural disaster, with the power to exempt any affected person or class of persons from any relevant regulatory provisions for a period and under such conditions as CIMA deems suitable.