Beneficial ownership platform on track for June deadline

Following the passage of three legislative amendment bills last week, Cayman will establish a centralized beneficial ownership platform by the June 2017 deadline agreed to with the U.K., government officials said in a media roundtable on Monday.

The amendments to the Companies Law, the Companies Management Law and the Limited Liabilities Companies Law define beneficial ownership and enable the creation of a corporate registry that is accessible by U.K. law enforcement and tax authorities.

“Now that the bills have passed, we turn our attention to the regulations,” said Dax Basdeo, chief officer in the Ministry of Financial Services. “That should be done in the next two or three weeks and should complete the legislative framework for beneficial ownership registration.”

At the same time, the focus shifts to the technology used to create a centralized platform for beneficial ownership data. David Smith, the ministry’s chief technology officer, said government, in collaboration with a working group composed of industry IT professionals, “is looking at everything in the process, from how we get the data into the beneficial ownership system to how we search.”

Given the sensitivity of the data, different options to balance physical security and the threat from cybersecurity are under consideration. Government will decide on a system in the coming weeks and then start building a solution, Mr. Smith said.

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Meeting the June deadline should not pose a problem, he added, because a lot of groundwork has already been done. “We are at a point where some critical decisions need to be made and then we can move ahead quite rapidly.”

Speedier access at a cost

Cayman has collected beneficial ownership information for anti-money laundering purposes for the last 15 years. The Financial Action Task Force, the international anti-money laundering body, sets out in its recommendations that countries should collect beneficial ownership data and have the ability to share that information through centralized registries or similarly effective systems.

Although the U.K. has been advocating publicly accessible centralized registries, Cayman agreed with the U.K. government in April 2016 to the creation of a similarly effective system.

The deal requires the Cayman Islands to establish a centralized platform that retains the current system whereby financial service providers collect and maintain beneficial ownership information.

The centralized platform will simply provide faster delivery of the data by connecting decentralized databases at each of the about 180 service providers with one centralized access point.

However, the process of requesting corporate ownership data does not change for U.K. authorities. The U.K.’s National Crime Agency and Serious Fraud Office will typically request beneficial ownership information as part of criminal investigations from Cayman’s Financial Intelligence Unit.

Under the new system, the information can then be retrieved electronically without having to inform the financial services provider.

In the past, U.K. authorities sent about eight requests for beneficial ownership information per year, in addition to an average of four cases per year in which the Cayman government proactively provided unsolicited information.

Wayne Panton, minister for Financial Services, denied that the new platform is only one step away from a public register, which would reveal all beneficial owners of Cayman-registered companies to the public.

“The approach that we are taking is to protect the privacy of our clients,” he said. Only if those clients are under legitimate investigation would the beneficial ownership information be provided to the authorities, Mr. Panton added.

Government has offered to provide beneficial ownership data on request through the centralized platform to countries other than the U.K., but none has shown any interest so far, the minister confirmed.

He said the costs for the project are likely to be twice as high as originally thought, “but not that significant.”

Private sector companies typically have sophisticated systems for corporate record keeping, Mr. Panton said, and off-the-shelf type solutions would be available for smaller firms.

“I don’t think that is something that is terribly burdensome. Most of the industry will already have the systems in place. There is going to be some cost, however. There is no question about that but I don’t think that it is in the order of magnitude that industry has a problem with.”

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