Compliance sweep disrupts Cayman residents’ bank accounts

Hundreds of ordinary Cayman Islands residents are being hit with onerous banking compliance requirements amid increased scrutiny over money-laundering threats. Some say their accounts were locked – with implications for this month’s salary and bill payments – when they failed to meet strict deadlines to hand in the paperwork.

Customers, many of whom have had the same bank account and the same job for decades, are being asked to provide proof of funds for their current account as well as notarised or certified identity documents. 

Several account holders told the Cayman Compass they had internet banking blocked or had their accounts locked completely because they did not provide the requested documents in time.

Butterfield Bank customers were alerted to the requirement, in most cases by email, and warned that they risked having their accounts being impacted if they did not comply within 30 days.

However, several account holders told the Compass the emails went into their junk folder and they were unaware of the requirement until they found their accounts blocked.

One customer told us his account was locked and he was unable to receive his salary until his employer cut him a check.

Another individual said they only became aware of a problem when their debit card was declined.

“I had received their email while I was off island but it had gone into my spam folder,” he said.

Several others were similarly impacted.

One customer told us their internet banking was blocked, preventing them from paying bills. They had not received any communication about the document requirements. Upon investigation, he said, it turned out the bank had sent a letter to an old PO box, despite his address having been updated in their system.

The Compass has had scores of complaints and calls from a variety of individuals about the same issue over the past four months.

In all cases, those customers said they had accounts for many years with Butterfield Bank, had already provided the information requested previously and had never been asked, until now, for renewed information.

Money-laundering vigilance

An email from the bank to customers stated the information was necessary as part of ongoing compliance with standard ‘know your client’ laws in Cayman and around the globe. Banks are required to know and to verify the identity and source of funds of their clients in an effort to prevent money laundering.

The email requested certified/notarised copies of a passport, a certified/notarised utility bill with current address, a letter from an employer stating salary and source of funds, and tax status forms.

Customers were advised to provide the information within 30 days to “avoid disruption to your accounts”.

Despite the short timeline and the requirement for certified or notarised documents, several customers told the Compass they were unable to get through to the bank with queries about the documentation required. Others said they were unable to get clear answers to queries about the required paperwork, like how to provide a utility bill if their living arrangement did not include one.

One account holder said he had simply found the requests “too much hassle and quite frankly too nosy” and closed his account after 20 years.

Another customer said she found it absurd that people with just a few thousand dollars in their accounts – and a clear source of funds from a local employer – were being impacted by regulations intended to stop the global flow of illegal money around the world.

They also questioned whether the bank had made enough effort to contact customers before taking action to impact their accounts. She said she had almost ignored the email, assuming it to be another phishing message.

Ironically, she said, the next email she received from the bank was an alert warning about phishing attempts and indicating it would not request personal information over email.

That email, sent to multiple customers, begins, “We have been made aware of a fraudulent e-mail that has been received by some clients in the Cayman Islands requesting customers to confirm personal information associated with their accounts. This e-mail is fake, and designed by criminals to obtain account information. Please do not respond to it or click on any links within it.”

Butterfield Bank declined to answer specific questions about the issue, characterising it as a routine compliance exercise required by law, and referring us to a more general statement from the Cayman Islands Bankers’ Association.

“Local banks operate in compliance with all Cayman laws and regulatory standards, and we are committed to maintaining the integrity of the Cayman Islands’ financial sector,” the association said in a statement.

“To ensure compliance, and to prevent money laundering and other financial crimes, local banks must conduct regular reviews of all client relationships, requesting ‘know your client’ (“KYC”) documentation and information to facilitate appropriate monitoring of accounts.

“We understand that requests for information and documentation may be considered onerous, and we sincerely appreciate our clients’ timely cooperation with such requests.”

The Cayman Islands was recently removed from the international Financial Action Task Force’s ‘grey list’ of countries that were considered not to be doing enough to fight money laundering.