Anti-money laundering review to include jewelry, real estate

Non-financial services businesses targeted

A bill that will seek to prevent money launderers and terrorist financiers from using non-financial services-related businesses in the Cayman Islands to carry out their illicit deeds is expected to come before lawmakers in the fall, Financial Services and Commerce Minister Wayne Panton confirmed this week.

The legislation, which seeks to be implemented well ahead of a pending 2017 review for Cayman by the Caribbean Financial Action Task Force, is expected to put the government’s Department of Commerce and Investment in charge of monitoring compliance with the new rules for local industries that do not already have legally recognized self-monitoring professional organizations.

Those industries expected to fall under the department’s remit include real estate companies and precious metals dealers.

Mr. Panton said Cayman will be quite familiar with periodic reviews done by the Financial Action Task Force, but the one due to occur in the second half of 2017 will be different than those the territory has experienced in the past.

“These new assessments are no longer just about technical requirements,” Mr. Panton said. “There will be an assessment based on effectiveness [of the current regulatory system]. Our view is we need to have that in place ahead of time.

“If it’s done a month ahead [of the assessment], we would never satisfy [the FATF],” Mr. Panton said.

Mr. Panton’s ministry chief officer, Dax Basdeo, said the underlying objective of the upcoming review is to ensure businesses that tend to handle large sums of money can verify, to a reasonable extent, that no cash laundering or terrorism support activities are going on.

This largely involves “know your client” exercises and other due diligence measures that would be carried out by a bank or financial institution in the regular course of doing business.

Mr. Basdeo said the government does not mean to suggest that other, non-financial services industries do not already have safeguards in place. However, he said there may be a need for some fine tuning in those industries.

Also, Mr. Basdeo points out that while some local professions, accountants for instance, already have legally established professional regulatory bodies, others do not. For those who do not, the current plan is to use the Department of Commerce and Investment as the regulator for anti-money laundering and anti-terrorist financing matters.

The Cayman Islands Monetary Authority already operates as the regulator for financial services-related businesses in Cayman.

Both Mr. Basdeo and Mr. Panton said none of the local industries who will be involved in the 2017 FATF review should be surprised.

The government has established separate working groups for both real estate and precious metals industries to prepare them for the new requirements and has been in communication with other professions, including lawyers and accountants on the subject. A recently proposed bill seeking to regulate nonprofit organizations is also expected to come before the Legislative Assembly in the fall, again with an eye toward safeguarding against money laundering activities.

Increased costs

The bottom line from the local real estate industry’s perspective regarding the FATF’s new regulatory efforts is increased costs, according to senior industry officials.

“It certainly increases the cost of doing business for all of our members,” said Cayman Islands Real Estate Brokers Association President Jeanette Totten.

Ms. Totten said local real estate companies who are members of CIREBA do follow current anti-money laundering mandates, although the new regime suggested by the government in preparation for the FATF review would likely require more in-depth information on buyers and sellers of Cayman properties.

“[CIREBA] requires all our members to attend training on a yearly basis,” Ms. Totten said. “We also hired an independent inspector to visit each of our members’ offices to make sure they are complying with the regulations.”

However, Ms. Totten said for real estate sellers who are not CIREBA members, the same process is not enforced. She said the association has received no requests from government to form a legally recognized regulatory body as was recently done for Cayman Islands accountants.

“The biggest hurdle [in doing so] would be the liability CIREBA would be undertaking of non-CIREBA member that are not bound by our strict rules and regulations,” she said.

Other industries

Mr. Basdeo said it is envisioned that the new Cayman Islands Institute of Professional Accountants would not need to be regulated under the Department of Commerce and Investment for anti-money laundering and terrorist financing initiatives because the association is already recognized in separate legislation.

Similarly, the local legal profession would be regulated to a certain extent by the Legal Practitioners Law, although recent efforts to update that legislation have fallen through.

With regard to charities or nonprofit organizations, the government has tried several attempts to approve legislation requiring those companies to provide due diligence documents via the former Charities Bill. A newly proposed Non-Profit Organizations Bill is due to come before the Legislative Assembly in the fall, possibly in September.