Assessors identify Cayman ‘deficiencies’
The Cayman Islands has failed to fully appreciate the risks of money laundering and terrorism financing and has a poor record on investigating and prosecuting financial crime.
Those are two of the findings detailed in a report published this week by the Caribbean Financial Action Task Force, based on a visit by assessors to the Caribbean territory in December 2017.
CFATF assessors visited Bermuda in October and November last year to conduct a similar assessment of Bermuda's regime to combat money laundering and terrorism financing.
In January, their preliminary findings, which have not yet been released publicly, were discussed by the Financial Policy Council, which is chaired by Curtis Dickinson, the Minister of Finance.
The Government of the Cayman Islands responded to this week's report by appointing a dedicated task force, made up of the Premier, the Attorney-General, the Deputy Governor, and several relevant ministers to implement a “comprehensive action plan” designed to tackle the deficiencies identified in the report within a year.
The mutual evaluation report examined Cayman's compliance with the Financial Action Task Force recommendations on AML/CFT systems. This was the first assessment to analyse the framework's level of effectiveness in practice.
It found that a national risk assessment conducted four years ago provided “a fair level of understanding” of Cayman's domestic money-laundering and terrorist-financing risks.
However, the report said the NRA did not focus enough on international risks, particularly in parts of the financial sector outside regulatory supervision, such as lawyers and excluded persons under Cayman's Securities Investment Business Law.
“This has resulted in major deficiencies that have inhibited the jurisdiction's ability to analyse and understand its risks,” the report stated.
Cayman had the sixth-largest banking sector in the world, the report added, citing data from the Bank of International Settlements in the second quarter of 2014, and “should have conducted a more thorough assessment of its inherent ML/TF vulnerabilities due to the significant size of the financial sector”.
The assessors concluded that “the investigations and prosecution of money laundering in the Cayman Islands are primarily domestic minor predicate offences”, which “may not be fully commensurate with its risk profile”.
The report noted that the Royal Cayman Islands Police Service and the Office of the Director of Public Prosecutions have dedicated resources to combat financial crime.
However it found that “large and complex financial investigations and prosecutions have not been identified, or pursued, and there is limited focus on stand-alone money-laundering cases and foreign-generated predicate offences”.
There were fundamental challenges in how Cayman idenitified potential financial crime for investigation.
The authorities “do not have access to the widest possible level of relevant information nor does the jurisdiction collect relevant information from its reporting entities (eg wire transfers) that would allow for the proactive identification of cases for investigation”, the report adds.
However, the report added that Cayman “has an objective to remove the financial benefit from crime” and had “a solid and highly professional institutional framework”. Almost all professionals the assessors spoke displayed “a solid understanding of risks and are skilled in applying relevant control measures”.
The Cayman Compass reported that Alden McLaughlin, the Premier of Cayman, said: “The Cayman Islands remain fully committed to upholding the highest global standards on money laundering and terrorist financing.
“Our anti-money laundering and counter-financial terrorism action plan will send a clear signal that we intend to maintain those standards.
“Work is already underway to improve information gathering, more rigorously monitor financial activity and enhance enforcement including the confiscation of assets.”
After a 12-month observation period, the FATF's International Co-operation Review Group is set to issue a report on Cayman's progress.
• A copy of the full CFATF report on the Cayman Islands appears on this webpage under the heading Related Media