Regulatory Enforcement; Developments in the Cayman Islands

IMPORTANT: The full content of this page is available to premium users only.

Friday, May 19, 2023
Elisabeth Lees

Jurisdictions have been under pressure to demonstrate their effectiveness in the Fourth Round of Financial Action Task Force Mutual Evaluations, and this will be intensified during the Fifth Round, due to commence in 2024. Mutual Evaluations assess the level of a jurisdiction’s compliance with the Anti-Money Laundering, Anti Terrorist Financing, Counter Proliferation Financing and Targeted Financial Sanctions framework laid down by the FATF as the global standard setter. The assessment consists of two parts, technical compliance (whether the jurisdiction has the legal framework in place) and effectiveness (how well the jurisdiction is implementing this framework). There are particularly dire consequences for those jurisdictions that receive poor Mutual Evaluation results[1] and meet the M3[2] financial threshold, as these countries, following an observation period[3], if they fail to demonstrate ‘positive and tangible’ progress will be placed on the FATF list of ‘Jurisdictions under Increased Monitoring’. Following the February 2023 FATF Plenary, 26 countries feature on this so called ‘grey list’, which can result in adverse economic consequences for the grey-listed countries.

[1] The jurisdiction has 20 or more non-Compliant (NC) or Partially Compliance (PC) ratings for technical compliance; or it is rated NC/PC on 3 or more of the following Recommendations: 3, 5, 6, 10, 11, and 20; or it has a low or moderate level of effectiveness for 9 or more of the 11 Immediate Outcomes, with a minimum of two lows; or it has a low level of effectiveness for 6 or more of the 11 Immediate Outcomes.

[2] A country may be subject to review by the International Cooperation Review Group if it is above a 5 Billion USD threshold for M3 (Money supply).

[3] The Observation Period is a twelve-month period during which a jurisdiction is given time to meet its Recommended Actions and thus avoid the grey list.