Cayman Islands

1. Do the Cayman Islands have legislation making it a criminal offence to engage in money laundering and/or terrorist financing?

Yes, the Proceeds of Crime Act, the Anti-Money Laundering Regulations, the Terrorism Act, the Proliferation Financing (Prohibition) Act and ancillary regulations and guidance notes together form a comprehensive and modern anti-money laundering, counter terrorist financing and sanctions regime.

2. To whom does the legislation apply?

The Primary Offences (see further question 4) apply to all persons. Regulatory Offences (see further questions 3 and 8) apply to businesses in the regulated sector and, in the case of failing to disclose a suspicion of money laundering, to any person who forms that suspicion based on information that came to him or her in the course of employment, trade or business.

3. What does the legislation prohibit?

The Proceeds of Crime Act prohibits the concealing of criminal property, entering into arrangements to facilitate the acquisition, retention, use or control of criminal property by or on behalf of another person, the acquisition, use and possession of criminal property (the Primary Offences), failure to disclose a suspicion arising in the course of business, and tipping off (the Regulatory Offences).

The Terrorism Act prohibits acts of terrorism, weapons training, the development of biological weapons and toxins, and the use of nuclear or chemical weapons. This act also criminalises the failure to freeze funds or economic resources found by the authority to be related to terrorism and imposes monitoring and reporting obligations.

The Proliferation Financing (Prohibition) Act criminalises the doing of business with sanctioned persons or entities.

4. How is money laundering defined? Does underlying criminal activity have to be proven?

Money laundering is defined as an act which constitutes a ‘Primary Offence’ (or an attempt, conspiracy, incitement to commit a Primary Offence, or aiding, abetting, counselling or procuring such offence) or would constitute such an offence specified if done in the Cayman Islands. The Primary Offences under the Proceeds of Crime Act all relate to the proceeds of criminal conduct, which is defined as any conduct constituting an offence in the Cayman Islands or, where criminal conduct has taken place outside the Cayman Islands, would constitute an offence there (meaning there is a requirement of “dual criminality” for an activity outside of Cayman to be considered criminal conduct in this jurisdiction).

It is not necessary for there to be a prior conviction for the criminal conduct for the offence of money laundering to be made out.

5. What level of intent or knowledge is required to establish a violation?

The Primary Offences require that the property in question is “reasonably suspected” of being criminal property. The offence of failing to disclose requires that the person “knows or suspects or has reasonable grounds for knowing or suspecting” that another is involved in criminal conduct.

6. What are the potential penalties for infringing the legislation?

Penalties for a Primary Offence are: on summary conviction, a fine of five thousand dollars or imprisonment for a term of two years, or both; or on conviction on indictment, imprisonment for a term of fourteen years or a fine, or both.

Breach of the main offences under the Terrorism Act may result in life imprisonment. Failure to report terrorist activity will result on summary conviction, in a fine of four thousand dollars and imprisonment for six months and on conviction on indictment in a fine and imprisonment for five years.

Breach of a freezing order under the Proliferation Financing (Prevention) Act results, on summary conviction, in a fine of fifty thousand dollars or on conviction on indictment, a fine of seventy thousand dollars or imprisonment for a term of three years, or both.

7. Does the legislation have extra-territorial reach?

Certain offences under the Terrorism Act or Proliferation Financing (Prohibition) Act may be committed by a person acting in the course of a business in the financial sector although the conduct which gives rise to the offence takes place wholly or partly outside the Cayman Islands. As set out under question 4, criminal conduct occurring outside of the Cayman Islands may underpin a money laundering charge within the jurisdiction if the element of dual criminality is present.

8. Are there additional anti-money laundering or counter terrorist financing regulations or obligations, such as registration or reporting obligations, for businesses or individuals that operate in particular sectors or undertake particular activities?

Offences relating to the failure to disclose a suspicion of money laundering and tipping off apply to persons who come into that suspicion in the course of a business in the regulated sector or other trade, business, profession or employment. The offences of failing to establish and maintain adequate policies and procedures for the prevention of money laundering, conduct customer due diligence, maintain records, train staff etc. apply to businesses in the regulated sectors (including banks, insurers, mutual funds, fund managers, etc.). Businesses conducting relevant financial business and Designated Non-Financial Businesses and Professions (e.g. real estate agents, jewellers dealing in high value goods) are also required to appoint certain compliance and/or money laundering reporting officers and undertake customer due diligence.

9. What are the potential penalties for failing to comply with these obligations?

Penalties for most Regulatory Offences are on summary conviction, a fine of five thousand dollars or imprisonment for a term of two years, or both; or on conviction on indictment, imprisonment for a term of five years or a fine, or both.

10. Who are the relevant enforcement authorities in the Cayman Islands and what are their contact details?

The Financial Reporting Authority in the Cayman Islands has responsibility for receiving, requesting, analysing and disseminating financial information disclosures concerning the proceeds of criminal conduct, money laundering and the financing of terrorism. The Cayman Islands Monetary Authority is responsible for the regulated sector. For Designated Non-Financial Businesses and Professions, the Department of Commerce and Investment is the relevant authority.