On 27 October 2023, the Financial Action Task Force (“FATF”) announced at its plenary in Paris that the Cayman Islands would be removed from its anti-money laundering “grey list” as the FATF has determined that the Cayman Islands AML regime now meets the international standard.
Background / Timeline
In March 2019, following an assessment of the jurisdiction by the Caribbean FATF (“CFATF”), the CFATF published a Mutual Evaluation Report (the “Report”) which assessed the effectiveness of the Cayman Island's anti-money laundering, countering terrorist and proliferation financing measures and compliance with the FATF's '40 Recommendations'.
In February 2021, a follow up report published by the FATF rated the Cayman Islands as compliant or largely compliant with 39 of the FATF's 40 recommendations.
Notwithstanding the above, at a FATF plenary that took place in February 2021, whilst the FATF recognized that the Cayman Islands had satisfied 60 of 63 actions to strengthen its anti-money laundering, countering terrorist and proliferation financing measures that were set out in the Report, the Cayman Islands was placed on the list maintained by the FATF of jurisdictions under increased monitoring (the “grey list”) pending its completion of the three final action points.
The rationale for the Cayman Islands inclusion on the grey list arose from it being a major financial centre and, as such, is considered to be confronted with inherent AML/CFT risks. The FATF expects countries presented with higher risks to have measures in place commensurate with that risk.
The Cayman Islands was given an action plan which included:
- applying sanctions that are effective, proportionate and dissuasive, and taking administrative penalties and enforcement actions against obliged entities to ensure that breaches are remediated effectively and in a timely manner;
- imposing adequate and effective sanctions in cases where relevant parties (including legal persons) do not file accurate, adequate and up to date beneficial ownership information; and
- demonstrating that they are prosecuting all types of money laundering in line with the jurisdiction's risk profile and that such prosecutions are resulting in the application of dissuasive, effective, and proportionate sanctions.
As of June 2023, it was announced that the Cayman Islands fully satisfied the recommended actions laid out by the FATF.
What the FATF Decision means
The FATF's recent decision is very welcome news and confirms the Cayman Islands' reputation as a well-regulated jurisdiction in all AML matters.
From an EU perspective, the EU Commission maintains a list of “high risk third countries” made up of jurisdictions which are deemed to have strategic decencies in their AML/CFT regimes and which includes those jurisdictions listed on the FATF grey list. As a result of the Cayman Islands FATF grey listing, the Cayman Islands was added to this list in March 2022. There is now an expectation that the removal from the FATF's grey list will soon lead to the Cayman Islands' delisting from the EU's AML / CFT List.
The FATF's decision to delist the Cayman Islands completes the Cayman Island's participation in the FATF's 4th-round mutual evaluation process. The FATF will commence its 5th round process in 2025, with the Cayman Islands evaluation expected to begin in 2026.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.