Corporate services firm Walkers Corporate Ltd has filed a suit against the Minister of Financial Services and the Registrar of Companies over request letters sent by the ministry to the company and its clients claiming outdated or incomplete beneficial ownership data.
The 500 separate letters received by Walkers Corporate in January 2022 each asserted that there was “relevant change” related to “registrable persons” under the Companies Act because the submitted passport, driver’s license or other government-issued document had expired.
The letters demanded details of correspondence with each beneficial owner in respect of the expired document and any restriction notice issued as a result.
In addition, the letters threatened administrative fines of Cl$5,000 in each case, if there was no response within a stipulated timeframe.
The proceedings filed in the Grand Court seek the determination of the Court of the meaning and effect of two sections of the Companies Act.
Section 255 (1) of the act requires companies to notify beneficial owners if they become aware of a relevant change in their particulars and request confirmation of the change.
The Companies Act defines a change in particulars as relevant if it renders the person’s information in the beneficial ownership register “materially incorrect or incomplete”.
The corporate services firm argues that the expiry of a passport, driver’s licence or other government-issued document was not a relevant change for the purpose of Section 255 of the Companies Act.
In its court filing, Walkers Corporate said it was neither a change nor relevant and it did not make the required particulars materially incorrect or incomplete.
As to the threatened sanction, the company said, under the law, the Registrar of Companies should not impose a fine until six months after it has become aware of a breach.
This would be – in this case – the relevant expiry date of the document as entered in the beneficial ownership register, Walkers Corporate said.
The Cayman Islands government is under pressure to demonstrate to the Financial Action Task Force by May of this year that it has implemented an agreed action plan.
The plan was adopted after the FATF placed Cayman on a list of jurisdictions under increased monitoring because of deficiencies in its anti-money laundering regime.
Among other things, it calls on the Cayman Islands to impose adequate and effective sanctions in cases where beneficial owners or their services providers do not file accurate, adequate and up-to-date beneficial ownership information.
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I do hope reason prevails here: an expired DL or passport is a problem for the document’s primary purpose only: ie for driving or passing through a border control. When its obtained as a form of ID, the expiration does not negate the original ID confirmed.
It would be good for the Govt to accept that expired documents do NOT require updating when used for ID purposes. And roll that out to the various private sector institutions. It would save us local customers a lot of KYC hassle as well. (And that for whatever they think a CI passport proves a CI voter’s ID also proves, for KYC purposes.)