Investor briefing highlights Cayman’s stability, new regulations

In video messages to international investors, government along with financial regulator Cayman Islands Monetary Authority last week emphasised Cayman’s resilience during the coronavirus pandemic and in the face of increasing regulatory demands placed on offshore financial centres by international standard setters.

The statements by Premier Alden McLaughlin, Financial Services Minister Tara Rivers and CIMA Managing Director Cindy Scotland, were part of the virtual Cayman Finance Global Briefing which this year replaced the investor breakfast that would typically take place in New York each January.

McLaughlin noted that COVID-19 had posed substantial risks to the islands but also provided an “extreme example” of Cayman’s resilience “due to exceptional effort from our citizens, timely leadership from my government and creativity by industry”.

“By prioritising health and safety while enabling continued economic activity, we have provided critical policy and fiscal stability during a very difficult time,” he said.

In addition, government continued to work with Cayman Finance to provide legal and regulatory flexibility to support the financial services industry.

This included “innovative new tools and services for investors” such as the Global Citizen Concierge Programme. Under the programme, professionals who are employed outside of Cayman, with the appropriate financial independence, can live and work remotely in Cayman for up to two years.

Regulations

Financial Services Minister Tara Rivers

Rivers said Cayman continued to be the jurisdiction of choice for investment funds and other financial services businesses because of its internationally recognised regulatory regime.

Despite the pandemic, it has been a busy year in terms of legislative and regulatory initiatives, largely to address a tax blacklisting by the EU in February 2020 and the ongoing review of Cayman’s anti-money laundering framework.

Legislative amendments were successful in achieving Cayman’s removal from the EU list of uncooperative jurisdictions in tax matters. The result of the Financial Action Task Force assessment of the progress Cayman has made in fighting money laundering is due later this month.

“Although regulation is not always welcomed, our financial services industry and clients will ultimately benefit from the jurisdiction’s ability to participate on a level playing field with international financial centres and to meet or exceed international standards,” Rivers said.

She added that the continued inflow of registrations, the establishment of new funds and trusts, an uptick in the insurance business and the establishment of increasing numbers of single- and multi-family offices in the jurisdiction were testaments to the success of Cayman’s regime.

“There are many factors to consider when deciding where to invest and do business, but the hallmark of that decision is one of stability,” she said.

The financial services minister said new regulations for the safekeeping and valuation of assets, as well as cash flow monitoring, all enhanced investor protections and gave investors more reasons to do business with Cayman.

The new funds regime included the Private Funds Act, which saw the registration of 12,695 private funds. These funds, together with limited investor funds that have 15 or fewer investors, are now for the first time under the supervision of CIMA.

The same applies to registered persons, formerly known as excluded persons, who are now subject to enhanced supervision by the authority for anti-money laundering purposes.

Virtual asset services providers, meanwhile, have had to register with CIMA since October 2020 and will be subject to CIMA licensing later this year.

Legislative amendments also gave the financial services regulator more enforcement powers, including those of an expanded regulatory fines regime.

Financial services statistics

Cindy Scotland, managing director, CIMA

“Despite the challenges faced in 2020, the industry stood strong,” CIMA Managing Director Cindy Scotland said.

New regulatory requirements meant the number of regulated funds in Cayman jumped to 24,591 at the end of last year, up from 10,857 in 2019.

The insurance sector added 36 new international insurance companies in 2020, compared to 33 the previous year, bringing the total of insurance licensees to 771. New insurer formations included 30 captives, four insurance-linked securities and two Class ‘D’ reinsurers.

The number of trust and company management licensees saw a marginal 1% increase, while the number of banks dropped from 123 to 110 last year.

“Although there has been a decline in licensed banks due to optimisation efforts, activities showed heightened interest in Category A and B licences,” Scotland said.

This year, she said, the authority will see significant infrastructure and human capital investments, with a regulatory focus on strengthening Cayman’s anti-money laundering risk framework.

Another focus area will be the finalisation of the framework for domestic systemically important banks and interest rate risk in the banking book.

“The development of a virtual asset framework that captures coin issuances, trading platforms, exchanges and sandboxes will also be a top priority,” Scotland said. “Definitions on how this new framework fits into the existing regulatory regime will be determined, along with implementing the necessary support infrastructure.”

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