Financial services: who is asleep at the wheel?

| 02/03/2021 | 3 Comments

Alric Lindsay writes: Two recent news pieces, one appearing on the website of the Financial Action Task Force (FATF) and the other from a video of the European Parliament’s subcommittee on tax matters, cause reasons for concern that some high officials in our government may have temporarily taken their eyes off the dashboard or are falling asleep at the wheel when it comes to the protection of our financial services industry.   

For those who are not working in the financial services industry, please note that any negative reference to the Cayman Islands by the EU subcommittee or the FATF could have adverse effects on the financial services industry.   


As you know, the FATF is a body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. On the FATF website, it was noted that the Cayman Islands were being placed on a “grey” list. This means that the FATF is of the view that, while the Cayman Islands is technically compliant by having relevant laws and regulations in place, the FATF is not satisfied that the anti-money laundering regime of the Cayman Islands is effective enough because, in simple terms, not enough people are being penalised and going to prison at the rate that the FATF expects.

The FATF website states: “The Cayman Islands will work to implement its action plan, including by: (1) applying sanctions that are effective, proportionate and dissuasive, and taking administrative penalties and enforcement actions against obliged entities to ensure that breaches are remediated effectively and in a timely manner; (2) imposing adequate and effective sanctions in cases where relevant parties (including legal persons) do not file accurate, adequate and up to date beneficial ownership information; and (3) demonstrating that they are prosecuting all types of money laundering in line with the jurisdiction’s risk profile and that such prosecutions are resulting in the application of dissuasive, effective, and proportionate sanctions.”

The Cayman Islands are now under “increased monitoring” by the FATF as a result of the foregoing. If the “deficiencies” identified by the FATF are not corrected swiftly, then the Cayman Islands could find itself on the FATF blacklist, meaning that it may become difficult or impossible for investors to do business with us. This is similar to the position previously taken by the EU.

EU Council Resolutions

Not long ago, the Cayman Islands appeared on another list, the EU blacklist. The Cayman Islands made it off the infamous EU blacklist, but almost moments later, the EU held a meeting stating that there is a “concern for a lack of effectiveness and transparency of the listing process of non-cooperative tax jurisdictions” and “there is a need to update EU listing criteria in order to adapt to the current and future challenges”.  In other words, although the Cayman Islands complied with previously stated requirements, the EU now wishes to change the goalpost. As admitted in the video on the EU website, the determination of where the goalpost is placed is political.

Pro-active steps required

Since the blacklisting criteria seems political, we need leaders who are proactive and who prevent the Cayman Islands from being placed on black and grey lists in the first place.  We must:

  1. coordinate with the Cayman legal and accounting professions to allow some of their senior members to work (by way of secondment) for the government for a period of time.  These persons understand the intimate details of the financial services industry and can have a more effective dialogue, negotiating directly with the EU.
  2. enhance our relationships with other offshore jurisdictions and be unified in our response to any “bullying” by larger jurisdictions. There is more strength in numbers.
  3. develop relationships with smaller member states of the European Union. Such member states may also have difficulties complying with changing goalposts. Building such relationships is another way to establish a unified front to challenge political determined blacklisting criteria.

What happens if we fall asleep at the wheel?

If we do not take proactive approaches and only wait and see what the FATF or the EU does next, our financial services industry will face difficult challenges in the future. A damaged financial services industry may mean that our people lose jobs, our country’s reputation could be marred indefinitely and financial services investors may change their jurisdiction of choice to some other place. We must work together with industry stakeholders in and outside the Cayman Islands to ensure that the Cayman Islands stays ahead of the game and that we become the standard setters and leaders (not followers) regionally and globally.

Alric Lindsay is a candidate for George Town South.

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Comments (3)

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  1. Anonymous says:

    I know this is supposed to be a post for those who don’t know much about the issue. Unfortunately it is a gross oversimplification of the issues and how they can be fixed. What exactly does Alric expect these lawyers and accountants will do if seconded to CIG? It takes political will to have strong legislation and strong institutions, including police and prosecutors. Without those at the helm (ie elected officials) pushing these issues both within Parliament and in the government building (by getting their employees to do some work and sacking those who are incompetent), we are going nowhere .

  2. Anonymous says:

    Good job, Alric.

  3. Anonymous says:

    I look forward to Barbara’s rebuttal to this column. I wonder if she’ll say it was a miscommunication?


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