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New Cayman Islands fines and TIA offence

14 Jul 2020

CIMA now has the power to impose significant fines

The Cayman Islands Monetary Authority (CIMA) can now impose significant financial penalties for any breach of a regulatory law, regulation or CIMA rule, with the passing of the Monetary Authority (Administrative Fines) (Amendment) Regulations, 2020.

CIMA previously had the power to impose fines for breaches of the Anti-Money Laundering Regulations, however this new framework vastly expands the scope of CIMA’s reach.

Which regulatory laws are covered by the new framework?

CIMA’s powers to impose financial penalties now reaches across 13 laws plus their respective regulations and CIMA rules (Regulatory Laws). The key Regulatory Laws are:

  • Anti-Money Laundering Regulations (Revised)
  • Banks and Trust Companies Law (Revised)
  • Companies Management Law (Revised)
  • Directors Registration and Licensing Law, 2014
  • Insurance Law, 2010
  • Monetary Authority Law (Revised)
  • Mutual Funds Law (Revised)
  • Private Funds Law, 2020
  • Securities and Investment Business Law (Revised)

What are the fines?

The fines are scaled according to a three tier system, divided into breaches of a minor, serious and very serious nature.

For individuals, the penalty ranges from US$6,100 for a minor breach to US$122,000 for a very serious breach. For entities, the penalty for a minor breach is the same, however a very serious breach attracts a penalty of up to US$1,220,000.

Where a minor breach continues, the penalty may be imposed multiple times up to a maximum of US$24,400.

Who do these new financial penalties impact?

Any person or entity that breaches any provision of a Regulatory Law can be fined by CIMA.

In particular, all entities that hold a licence issued by CIMA fall within the scope of CIMA’s new powers.

Entities registered with CIMA as a Registered Person, a mutual fund or a private fund, those conducting ‘relevant financial business’, and those persons or entities registered with CIMA as a director are also now subject to this new fine system.

Will CIMA give notice prior to issuing a fine?

In most cases, CIMA must firstly issue a breach notice to the person or entity. The notice must be substantially in the prescribed form.

What criteria must CIMA apply?

The regulations set out a number of criteria that CIMA must consider in relation to both the issuing of a breach notice and the amount of any fine, such as the nature and seriousness of the breach.

Is there a right of reply or rectification period to a breach notice?

There is a reply period of 30 days for most breach notices, and a rectification period of 30 days for minor breaches.

How will CIMA issue a fine?

CIMA must consider the merits of any reply to a breach notice, or rectification of a minor breach, and if not satisfied it must impose a fine. The fine must be set out in a fine notice, together with certain other prescribed information, and issued to the person or entity.

Can a fine notice be appealed?

Yes, a fine notice may be reviewed or appealed upon an application made within 30 days of receipt of the fine notice. The review is either made to CIMA’s Management Committee or appealed to the Grand Court, depending on the level of the fine.

New TIA offence

It is now an offence for knowingly or wilfully supplying false or misleading information to the Cayman Islands Tax Information Authority (TIA). A fine of US$12,200 and/or imprisonment for 5 years may be imposed on any person who commits such offence.

A number of key filings are made through the TIA, such as CRS and FATCA reports and other international exchange of information filings, and persons should be mindful of this new offence when completing these filings.

If you would like any further information about any of these new fines, please contact your usual Harneys representative. If you have any other questions, visit www.harneys.com/Cayman.