The Cayman Islands government kept funds lawyers busy over Christmas and into the New Year by publishing a draft of updated laws and regulations in December which affect Cayman Islands investment funds. This blog briefly summarises those changes, please let any of the blog team know if you’d like more information or advice on any of them or have a look at our more detailed client alerts in the links below.
Comprehensively revised guidance notes on the prevention and detection of money laundering and terrorist financing were published in December, following on from updated AML regulations issued in October last year. Taken together, these introduce a risk based approach to anti money laundering / terrorist financing (AML/TF) compliance. The updated guidance notes are in force and apply to anyone carrying out relevant financial business in or from the Cayman Islands, including regulated investment funds like a typical Cayman Islands s 4(3) hedge fund. Regulated investment funds are still allowed to delegate compliance with their AML/TF obligations to a third party service provider in an equivalent jurisdiction that’s subject to the AML regulations in that country.
Amendments in 2017 to the definition of “relevant financial business” under Cayman’s AML legislation mean that unregulated investment entities, including many private equity and closed ended funds, will also now be bound by Cayman’s AML rules, although they have until 31 May 2018 to comply (please see our alerts for more details).
Higher penalties for breaching regulatory laws
Amendments to the Monetary Authority Law (MAL) approved in late 2016 and related detailed regulations also came into force in December, giving the Cayman Islands Monetary Authority (CIMA) the power to impose increased administrative fines for breaches of various Cayman Islands regulatory laws1, initially applying to breaches of the AML regulations, up to a maximum fine of CI$1 million (US$1,219,500). CIMA will classify breaches as minor, serious or very serious and apply this criteria when it exercises its discretion to impose fines.
Beneficial ownership registers changes
The Cayman Islands also recently amended the beneficial ownership register regime for Cayman Islands companies and LLCs, refining the regime that was introduced in July 2017. Cayman Islands regulated investment funds are still exempt from having to maintain a register but the changes (detailed in our alert) mean that some previously out of scope companies, including a corporate Cayman Islands investment manager / advisor which is registered as an excluded person under the Securities Investment Business Law, will now have to maintain a beneficial ownership register, unless another exemption applies. All out of scope companies, including investment funds registered with CIMA under the Mutual Funds Law, must also now file a written confirmation with their corporate services provider of the exemption they are relying on.
Automatic exchange of information (aka FATCA and CRS)
An updated list of participating and reportable jurisdictions has been published by the TIA adding Azerbaijan and Pakistan as participating jurisdictions and also as reporting jurisdictions for reports due in 2018 onwards and removing Kuwait as a reportable jurisdiction for reports due in 2018 onwards. We’re also expecting updated Common Reporting Standard guidance notes and an updated entity self-certification form to be issued in the next few weeks as well as an updated portal user guide. The AEOI portal is due to re-open in early March to allow relevant entities to register with the TIA by 30 April and file their FATCA and CRS reports by 31 May.
Please let any of the blog team know if you’d like more information or advice on any of these areas.
1 Banks and Trust Companies Law, Companies Management Law, Mutual Funds Law, Securities Investment Business Law, the Directors Registration and Licensing Law, AML Regulations, as well as breaches of regulations made under these laws