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Caymans on FATF grey list

Chris Hamblin, Editor, London, 1 March 2021

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When the Financial Action Task Force places a jurisdiction under 'increased monitoring,' it means that the country has promised to resolve its 'strategic deficiencies' swiftly and is subject to more monitoring than usual. This list is often externally referred to as the 'grey list'.

The global standard-setter has also added Burkina Faso, Morocco and Senegal to the growing list, which already contained 15 countries and now contains 19.

In February 2021, the Government of the Cayman Islands promised to work with the FATF and the CFATF (the Caribbean chapter of the FATF) to make its AML regime more effective. Since the completion of its 'mutual' (actually done by FATF inspectors) evaluation report in November 2018, the Cayman Islands has made progress on some of the actions that the report recommended with this in mind. It has:

  • updated its national AML strategy;
  • conducted a terrorist-financing-risk assessment and a number of sectoral risk assessments;
  • amended its Anti-Money Laundering (Amendment) regulation and Proceeds of Crime (Amendment) law;
  • designated an AML regulator for DNFBPs (Designated Non-Financial Businesses and Professions); and
  • created a new Bureau of Financial Investigations for investigating money laundering.

The Cayman Islands' Government also has also evolved an action plan to please the FATF. It intends to do the following.

  • Apply sanctions that are effective, proportionate and dissuasive, taking administrative penalties and enforcement actions against obliged entities to ensure that breaches are remediated effectively and in a timely manner.
  • Impose adequate and effective sanctions in cases where relevant parties (including legal persons) do not send it accurate, adequate and up-to-date information about the beneficial ownership of bodies corporate.
  • Show the CFATF that it is prosecuting all types of money laundering in line with the islands' risk profile, also proving that such prosecutions are resulting in the application of dissuasive, effective and proportionate sanctions.

Barbados and Panama are the two other offshore jurisdictions that are on the list at present.

This month, Barbados also promised to make its AML regime more effective. Its last evaluation was in November 2017 and since then it has conformed to some of the FATF's orders by "improving technical compliance and effectiveness," whatever that means, by making its National Risk Assessments more modern. Its action plan consists of the following.

  • It has to show the FATF that it is effective at supervising financial institutions and DNFBPs in a risk-based way.
  • It must try to prevent legal persons and arrangements from being misused for criminal purposes and ensure that accurate and up-to-date basic information and information about beneficial ownership is available to whoever wants it on a timely basis.
  • It must increase the capacity of the financial intelligence unit or FIU to improve the quality of its financial information.
  • It must show the FATF that money-laundering investigations and prosecutions are in line with its risk profile.
  • It must reduce the backlog to complete prosecutions that result in sanctions.
  • It must do more to try to confiscate property in money-laundering cases - in this regard the FATF does not think that it is very effective at seeking help from foreign countries.

Since June 2019, when Panama made its own promises to the FATF, it has done little more than publish some terrorist-financing risk assessments and sectoral risk assessments for the corporate sector, DNFBPs and free-trade zones. It has also passed legislation on the subject of beneficial ownership.

The action plan calls for the following.

  • The Government must do more to understand the money-laundering risks attached to legal persons, i.e. the corporate sector, and use that to offset those risks.
  • It must go on trying to spot unlicensed money remitters, applying a risk-based approach to its supervision of the DNFBP sector and imposing effective, proportionate, and dissuasive sanctions again AML violations.
  • It must ensure that banks and other 'obliged entities' (the FATF's term for reporting entities) do enough to verify up-to-date beneficial ownership information and hand it to the competent authorities on time.
  • It must set up effective mechanisms to keep an eye on offshore entities, paying special attention to preventing people from misusing nominee shareholders and directors.
  • It must continue to use 'FIU products' for money-laundering investigations, while demonstrating its ability to investigate and prosecute money laundering that involves foreign tax crimes and continuing to co-operate with other countries swiftly and constructively in respect of such offences.
  • Lastly, it must continue to concentrate on money-laundering investigations in relation to highly risky areas.

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