Cayman freezes US$8.35B of assets under Russian sanctions

(CNS): The Cayman Islands Government (CIG) established a Russia Sanctions Task Force on 16 March 2022, almost two years ago. The task force, known as Operation Hektor, is chaired by Financial Reporting Authority (FRA) Director R.J. Berry. It was formed to coordinate, identify, and make policy amendments to implement sanctions on the Russian regime.

Since then, 1,319 Compliance Reporting Forms have been reviewed and processed, identifying around US$8.35 billion, €230 million, and £264,000 of funds that have been frozen, and 211 Suspicious Activity Reports (SARs) have also been filed in the same period.

In February, before the second anniversary of Russia’s illegal invasion of Ukraine, a tabletop review was taken of Operation Hektor with facilitators from the UK to discuss the operation’s successes, simulate scenarios and gather best practices to be shared with fellow British Overseas Territories. The exercise was coordinated with the UK’s Foreign, Commonwealth and Development Office (FCDO), the Governor’s Office and the Cayman Government.

Some two dozen representatives from across government took part in the two-day exercise. Ian Bolton, Founder and CEO of Sanctions SOS, and Ross Savage, senior expert in financial crimes and Director of Grant Ropas Ltd, facilitated the exercise. Cayman is the first stop on the sanctions management tour led by Bolton, Savage and the FCDO.

A press release said this was because of Cayman’s “developed processes and achievements”, which identified it as an effective model for other overseas territories to follow. A major factor in the operation’s success was “the active cross-government approach and outreach with the private sector.

Operation Hektor comprises members from eleven government departments and agencies who meet with the Governor’s Office monthly to discuss and review international news, reports, sanctions and current data to support any policies and decisions made. 

Bolton and Savage have been observing the management processes and successes of the Operation Hektor Task Force since its inception, and, the government stated, they have been “impressed with the Cayman Islands’ ability to successfully establish a multi-agency partnership” the key to responding quickly to a rapidly changing landscape. 

“One of the key achievements is the coordinated approach and having all the relevant stakeholders around the table,” Berry said. “That may seem simple, but in discussions with other jurisdictions, that’s actually been problematic for some of them, so having the right people around the table, we were then able to start creating or recording relevant statistics regarding compliance reporting forms (CRFs) being filed, frozen assets, those types of things.”

Bolton and Savage have also provided guidance on the UK Sanctions and Anti-Money Laundering Act and how to comply with the recommended framework. As the UK government aims to enhance competitiveness while meeting international standards, Operation Hektor helps manage license applications, advises the Governor on the deregistration of Cayman-flagged vessels, and processes CRFs, which have reported frozen assets totalling well over US$8 billion.

“Sanctions are on an upward trajectory worldwide,” said Bolton. “Russia’s invasion of Ukraine saw a dramatic increase, and that is the direction that will continue forward from here.”

Thirty amendments to the sanction orders were made between 2020 and 2023. The development of sanctions has expanded from a focus on financial funds or resources to the use of goods, assets and migration of persons seeking employment in other jurisdictions. Examples of these sanctions or restrictions include the freezing of assets, travel bans, and restrictions on transport resources, as well as restrictions on numerous professional and legal services. 

Governor Jane Owen met with the facilitators at the exercise’s completion and is pleased that Cayman has been chosen as the pilot for this series of tabletop exercises. These exercises will now be rolled out across the other OTs to ensure that the Russia sanctions regime is robustly enforced.

“The exercise identified both risks and opportunities to ensure effective enforcement of the Russia sanctions regime in the future,” Owen said, adding the UK’s support in funding the exercise and providing expert facilitators showed their commitment to the Overseas Territories. 

A key theme from the management of sanctions is that it is everyone’s business. In a continued commitment to sharing information on the governance of the Islands and the efforts made to safeguard the community, two educational videos on sanctions and Operation Hektor were produced. These videos highlight the tabletop exercise and share information on how sanctions have developed and their current status.

See the videos here and here.

Task Force’s Structure:

• Financial Reporting Authority (Chair)
• Cabinet Office (Secretariat)
• Office of the Governor
• Portfolio of Legal Affairs
• Ministry of Financial Services and Commerce
• Cayman Islands Monetary Authority
• Maritime Authority of the Cayman Islands
• Civil Aviation Authority of the Cayman Islands
• Cayman Islands Bureau of Financial Investigations (this is RCIPS arm of representation)
• Cayman Islands Customs and Border Control
• General Registry
• Lands and Survey Department

Operation Hektor Highlights: The following are some key statistics on the Russia sanctions work that has been undertaken by the Cayman Islands as of June 2024: 

• 4 General Licenses (GL) have been issued by the Governor or Acting Governor, including the extension of one GL. 14 organisations have reported they are relying on the GLs
• 42 Ongoing processing of license applications – thirty-seven (37) have been received since 1 March 2022 (22 received in 2022 and 13 in 2023) and two (2) received in 2024.
• 2 Cayman flagged vessels have been deregistered by direction of the Governor. In addition, over forty (40) vessels have been deregistered as they were unable to meet the requirements of the Merchant Shipping Act due to restrictions imposed by the Russia Sanction. A number of other vessels are under review for referral for deregistration.
• 7 helicopters and six (6) fixed wing aircrafts have been deregistered by the Cayman Islands Civil Aviation Authority, and a number of other aircrafts are still being monitored at this time.
• 1,319 CRFs – Continued review and processing of Compliance Reporting Forms (CRFs) related to the Russia Sanctions have been received since 1 March 2022; some of these forms identify funds that have been frozen: approximately USD8.35 billion and EUR 230 million and GBP 264,000.
• 211 Suspicious Activity Reports (SARs) filed since 1 March 2022.

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