Monday, October 26, 2020

Cayman: Attorney general takes aim at anti-money laundering assessment


Some of the findings of the Caribbean Financial Action Task Force concerning Cayman’s anti-money laundering regime have been blown out of proportion, according to Attorney General Samuel Bulgin.

Speaking in the Legislative Assembly on Wednesday, the attorney general lamented the constantly changing anti-money laundering rules and that the risks stemming from financial crime are evaluated differently when it comes to the Cayman Islands.

“We have expressed to the world our continuing commitment to ensure that the financial services industry in the Cayman Islands does not provide any safe harbour for those who are involved in any sort of illicit activity, but it is difficult to keep up with these international standards if for no other reason than the fact that the rules change midstream,” he said.

He pointed to Jamaica, which is currently undergoing the CFATF’s 4th round mutual evaluation, as an example of a country that has to change its rules on the fly because a “certain monetary threshold was literally changed overnight”.

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The attorney general said although Cayman is constantly reminding the world that its anti-money laundering and tax compliance framework is as good and, in some cases, much better than in other jurisdictions, “for some reason we have not been able to get the benefit of the doubt” and that “there are some countries, some delegates, some multilateral agencies who are simply not interested” and are “confused by the facts”.

He said the Cayman Islands was considered very high-risk, setting it apart from other countries involved in financial services. “For some reason, we seem to have taken on a different sort of attraction as it relates to risk,” he said.

The characterisation of Cayman’s ‘excluded persons’ regime, which is now being eliminated, was a case in point. “It has been magnified to give the impression that a significant amount of those who are involved in the security sector in the Cayman Islands are not subject to any kind of regulatory oversight at all; [that] they are some sort of a rogue and nobody knows what they are doing, which could not be further from the truth,” the attorney general said.

Of the 2,885 excluded persons, 45% are involved in the security sector and subject to some sort of licensing regime. The majority of the remaining 55% were attached to a regulated fund and therefore subject to regulatory oversight.

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“Whether it is adequate or not is another issue,” Bulgin said.

He said this would leave only 10% to 12% of the remaining 55% that would not be subject to any regulatory oversight.

Cayman suffers from this “magnified representation” which “gives the entirely wrong impression”, he added.

The same misrepresentation applied to the lack of supervision of lawyers in the anti-money laundering context.

While it was true that there are lawyers who are not adequately covered for anti-money laundering purposes, a significant portion of lawyers, and especially those involved in the financial services business, were subject to group consolidated anti-money laundering supervision.

Other lawyers involved with corporate services business were covered because the business itself is regulated by the Cayman Islands Monetary Authority.

“So, there is some degree of regulation,” Bulgin said. “Even though we try to explain that to those who are involved in assessing our framework, they prefer not to see it that way because it fits the narrative and the perception that they have of the Cayman Islands.”

He added, “We can’t seem to convince our detractors that we have some sort of regulation and abide by international standards.”

With regard to a perceived lack of money laundering investigations and convictions, the attorney general noted that the only things available in the Cayman Islands were often documents related to the incorporation of an entity or the opening of a bank account.

Under these circumstances, he noted, it was much easier to send this evidence to the country where witnesses and suspects reside and more convenient for authorities to prosecute the perpetrators there.

Bulgin said this invariably explains why there are fewer money laundering convictions in the Cayman Islands.


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