Licensing and oversight requirements

At its core, the Act governs the licensing, operations, and oversight of entities involved in banking and trust business within the Cayman Islands. It establishes the requirement for businesses to obtain a valid licence from the CIMA as a precondition for operating either type of business. Licences are categorised based on the nature of operations, including “A” licences for broader banking activities, “B” licences for restricted services, and various trust licences for specialised fiduciary functions. Specific provisions outline the approval, issuance, and transfer of licences, ensuring that entities meet stringent fit-and-proper criteria. CIMA assesses the integrity, competence, and financial soundness of applicants and has discretion to impose conditions on, suspend, or revoke licences if deemed necessary in the public interest.

Definitions and obligations of entities

The Act provides explicit definitions of entities such as banks, trust companies, and controlled subsidiaries, delineating their respective roles and obligations. Trust companies, in particular, are required to maintain adequate professional indemnity insurance or equivalent safeguards to protect against potential financial risks. Additional obligations exist for licensees, such as adherence to capital adequacy requirements. This emphasises the sound financial footing expected of such institutions.

Safeguards and enforcement mechanisms

Several significant safeguards are embedded within the legislation to promote financial integrity. For example, auditors play a pivotal role by reporting irregularities, including instances where a licensee operates in a potentially detrimental or fraudulent manner. Failure to meet obligations, such as annual audits or the submission of accounts, may result in penalties, suspensions, or more severe actions. Similarly, CIMA wields investigatory and enforcement powers, including the ability to access a licensee’s books and records, conduct on-site inspections, and mandate corrective actions. Furthermore, CIMA is authorised to impose public disclosures where deemed necessary to uphold transparency standards.

Compliance and operational requirements

The Act also addresses key compliance measures, including net worth and operational requirements that vary by licence type. The use of financial instruments and the execution of relevant fiduciary activities are strictly regulated to prevent improper practices. Additionally, the issuance, transfer, or disposal of shareholders’ equity by any licensee requires prior approval from CIMA unless exempted.

Key amendments in the 2025 revision

The 2025 Revision incorporates significant amendments and updates that reflect evolving regulatory needs. Among them is the introduction of stricter provisions on economic and financial group structures to ensure that such arrangements do not hinder effective supervision or jeopardise financial stability. This ensures that Cayman’s financial system remains robust in both domestic and international contexts. Notable updates also include explicit references to the obligations imposed under the Beneficial Ownership Transparency Act (2023 Revision) and other aligned legislation, creating a cohesive regulatory architecture.

Appeals and authority responsibilities

The Act provides appropriate recourse for aggrieved parties, offering an appeals process against decisions made by CIMA. Appeals can be lodged with the Grand Court, ensuring that disputes are adjudicated fairly. Additionally, it recognises the responsibilities of CIMA, outlining its duties to monitor banking practices, investigate suspected contraventions, and report findings to the Cabinet when necessary.

Penalties and enforcement actions

Further provisions introduce penalties for violations, including fines and potential imprisonment for contraventions or the intentional submission of false information. Immunities are granted to CIMA and affiliated parties, safeguarding their function in implementing the legislation effectively. Any person or entity that fails to comply with the Act risks enforcement actions, from fines to the revocation of licences.

Conclusion: Strengthening Cayman’s financial sector

Altogether, the Banks and Trust Companies Act (2025 Revision) reinforces Cayman’s position as a regulated, reputable jurisdiction for banking and fiduciary services, maintaining a careful balance between fostering economic growth and safeguarding the financial system. Through its structured provisions, the Act ensures that the CIMA is empowered to supervise a resilient and trustworthy financial sector in the face of both local and global dynamics.

Further reading

• Cayman Islands Banks and Trust Companies Act (2025 Revision)