The Ministry of Financial Services has acknowledged Cayman’s expected listing by the European Union as a high-risk country for money laundering.
In a press release, the ministry said it will address any remaining anti-money laundering issues by completing a plan agreed on with the Financial Action Task Force, the international standard-setter in that space.
This would ensure that Cayman is removed both from the FATF grey list of countries and jurisdictions whose AML regimes are under increased monitoring and the EU list of high-risk countries.
The EU Commission updated the list in a directive on 7 Jan. and included Cayman on the basis of its FATF greylisting. It is expected to come into force in the next few weeks.
The EU listing will not affect how Cayman Islands investment funds are marketed in the EU under the Alternative Investment Fund Managers Directive.
However, the ministry said it is aware of proposed amendments to the directive “which, if enacted as expected in 2024, would prevent Cayman Islands funds from being marketed in the EU”.
Under the EU Securitisation Regulation, enacted last year, EU financial institutions are not allowed to use Cayman Islands entities for securitisations.
“Minister [André] Ebanks is in direct contact with the Cayman Islands’ leading industry practitioners in this sub-sector to provide appropriate updates and guidance,” the ministry said.
The anticipated EU listing will also require EU financial institutions to conduct enhanced due diligence on business relationships and transactions involving Cayman.
This may include obtaining additional information on customers, beneficial owners, and the source of funds and wealth; and selecting patterns of transactions that need further examination.
The ministry noted that for Cayman to be delisted by the EU, any actions the bloc may add on top of the FATF action plan would need to be completed.
“However, a FATF delisting should substantially, if not fully, assist with an EU delisting.”
The FATF plan requires the Cayman Islands to demonstrate effective and dissuasive sanctions for AML breaches, including beneficial ownership filing breaches, by January this year; and to demonstrate AML prosecutions by May.
To determine the timeline, and any necessary additional actions, for an EU delisting, Ebanks and ministry officials continue to engage with EU officials, the statement added.
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