CAYMAN PUSHES AHEAD WITH BENEFICIAL OWNERSHIP COMPLIANCE

By Staff Writer

The Cayman Islands Government(CIG) has taken a significant step towards further aligning the jurisdiction with UK and global efforts to combat money laundering and financing of terrorism.

After some initial resistance in Cayman and other UK Overseas Territories about the perceived intrusive nature of the public beneficial ownership registers, momentum is increasing to have the required legislation in place by October this year.

According to the Ministry of Financial Services and Commerce, the Cayman Islands is advancing its AML/CFT regime whilst reinforcing its commitment to global efforts in combating money laundering and terrorist financing with the introduction of the Beneficial Ownership Transparency Bill, 2023.

"This Bill, published last week, aligns with the Financial Action Task Force (FATF) global standards, ensuring that competent authorities have access to adequate, accurate and current information on beneficial owners of companies," a government release stated.

The FATF, an international organisation dedicated to combating unlawful activities and their negative impact on society, establishes the benchmark for countering global money laundering and terrorism financing. The Bill will play a crucial role in maintaining the Cayman Islands' adherence to these evolving international standards.

THE BILL

Beneficial ownership refers to individuals who ultimately own or control an entity. The Bill consolidates the beneficial ownership rules in the Companies Act, Limited Liability Companies Act, and Limited Liability Partnership Act into a single Act. This consolidation streamlines the beneficial ownership framework, bringing ease of use to industry participants and public authorities.

Minister for Financial Services, the Hon. André Ebanks, explained that the Bill will reinforce the Cayman Islands' reputation as a trusted financial services centre.

"The introduction of the Beneficial Ownership Transparency Bill, 2023, demonstrates the Cayman Islands' commitment to upholding global standards, as they evolve, in the fight against money laundering and terrorist financing. By enhancing transparency and ensuring access to accurate information, the Cayman Islands solidifies its position as a trusted global financial centre of excellence dedicated to combating financial crimes. Furthermore, the Bill will proactively assist the Cayman Islands in preparation for the 5th Round of the FATF evaluation process which will commence in 2025," Minister Ebanks said.

Over the last two years, there has been extensive consultation with industry stakeholders, members of the public, government partners, and international entities. The ministry says feedback gained throughout these discussions was critical in shaping the creation of the Bill, which has overall garnered positive comments from stakeholders.

THE PROCESS

However, it explains that before public access can move forward, Parliament must approve the required regulations. This will happen after discussions with the UK and other Overseas Territories, as well as Crown Dependencies, relating to necessary privacy safeguards.

Privacy has been an underlying concern by those opposed to the beneficial ownership registers bill which was challenged at the European Court of Justice in addition to the UK government preparing an Order in Council to impose the legislation on its territories.

A landmark judgement issued by the European Court of Justice in November 2022 struck down public access for beneficial ownership registries in the EU based on interference with privacy and data protection rights.

The UK Government has stated that it will provide both financial and advisory assistance to support its OTs with implementing beneficial ownership registers.

UK ORDER IN COUNCIL

Regarding the draft Order in Council to impose the scheme, the UK Government had said it is now not necessary to go ahead with it due to the firm commitments from all OTs to adopt publicly accessible registers. But it said the decision will be kept under review.

Here in Cayman, Minister Ebanks is expected to present the Bill at a meeting of Parliament anticipated for the fourth quarter of this year. If the Bill is passed, the existing legal obligations will remain in place until the new provisions are introduced in a phased approach. The Ministry of Financial Services and Commerce is also working on developing accompanying regulations and guidance, which will undergo consultation with industry members in due course.

The proposed legislation includes a clause that would enable Cabinet to make regulations to provide public access to specified beneficial ownership information.

According to the Ministry of Financial Services, this is in line with a commitment made by the Cayman Islands government in 2019 concerning the introduction of a public beneficial ownership register.

However, it says, public access can only be implemented if Cabinet regulations are affirmed by a resolution of Parliament.

The CIG assures that "no such regulations would be commenced until the effect of a European Court of Justice judgment from November 2022 has been clarified in discussions with the United Kingdom and other Overseas Territories and Crown Dependencies."

Cayman Finance CEO Steve McIntosh acknowledged the government’s measured approach to the issue, stating that “as one of the first jurisdictions to have already implemented a register of beneficial owners accessible to tax and law enforcement authorities in the United Kingdom, the Cayman Islands is at the leading edge of the global fight against money laundering, terrorist financing and tax evasion.”