Kendra Foster, Managing Partner of Ocorian Law – Cayman Islands, discusses the recent development of the Cayman Islands' removal from the EU Commission's list of high-risk third countries for AML/CFT purposes. This decision is a significant milestone for the jurisdiction and a testament to the efforts made by the government and private sector in strengthening its AML/CFT regime.
Kendra shares insights on the impact of this development for our clients and what it means for Ocorian in the Cayman Islands. We also look at the upcoming evaluations and the continued efforts to ensure compliance with international AML/CFT standards.
1. When will the Cayman Islands be removed from the EU’s list of high-risk third countries for AML/CFT purposes?
On 18 January 2024, the EU published a regulation which will affect the jurisdiction’s removal from the EU Commission’s list of high-risk third countries for AML/CFT purposes (the EU AML List) on 7 February 2024.
2. What is the significance of the Cayman Islands’ removal from the EU AML list?
The EU Commission highlighted that the Cayman Islands has strengthened the effectiveness of its AML/CFT regime. The steps taken by the government of the Cayman Islands to adopt and implement legislative and regulatory changes demonstrate the jurisdiction’s commitment to global initiatives aimed at preventing and combatting financial crimes and protecting the integrity and stability of financial markets and the global financial system.
3. How did the Cayman Islands secure its removal from the EU AML List?
After the fourth-round mutual evaluation undertaken by the FATF, the jurisdiction made extensive efforts to address FATF’s 63 recommended actions. At the end of the evaluation process, three recommended actions were outstanding. At that time, the Cayman Islands was placed on the FATF grey list and subsequently on the EU AML List. Once the three recommended actions were addressed, a final onsite visit was conducted, and it was determined that the jurisdiction had implemented a robust regime. The collaborative efforts of the public and private sectors have now culminated in the jurisdiction’s removal from the FATF grey list and imminent removal from the EU AML List.
4. What impact will the removal have on clients of Ocorian Cayman?
The main impact of the removal will be that the EU Securitisation Regulation (Regulation (EU) 2017/2402) will no longer apply to the formation of securitisation special purpose vehicles (SPVs) in the Cayman Islands.
When the Cayman Islands is removed, we foresee that institutions will in turn remove the Cayman Islands from their internal lists. Having these internal lists updated will mean that the enhanced due diligence policies and procedures adopted by these institutions will no longer apply to a Cayman Islands entity purely based on its jurisdiction of formation.
5. What is next for Ocorian in the Cayman Islands?
At Ocorian, we always strive to share key information with our clients to ensure the most up-to-date information is on hand to support their commercial decisions. We look forward to strengthening our existing relationships and building new relationships. We expect to see an increasing trend of business throughout the jurisdiction’s financial services sector, including new CLO mandates.
6. Are there any upcoming evaluations on the Cayman Islands AML regime?
FATF will commence its fifth-round evaluation process in 2025. The evaluation for the Cayman Islands will begin in 2026. As FATF makes changes to several of the forty recommendations, the expectation is that the Cayman Islands will review and, if required, update its legislative and regulatory framework to effectively implement the revised recommendations. FATF has advised that the fifth round of mutual evaluations will have an even greater focus on effectiveness, risk and context.
How can Ocorian help?
At Ocorian, we prioritise strict adherence to well-defined risk management and compliance procedures. We ensure that all necessary processes and controls are in place to align with international AML/CFT principles.
In today's environment, having a reliable partner is more critical than ever, and we are here to support you wherever you need us.
If you have any questions or seek a trustworthy partner in navigating these regulatory landscapes, please reach out to the Ocorian team.
What is the EU AML List?
The European Commission’s list of high-risk third country jurisdictions for AML/CFT purposes (i.e. EU AML List) is a list of countries deemed high-risk under the AML Directive – those countries whose AML/CFT regimes have strategic deficiencies which pose a significant threat to the EU’s financial system. The EU AML List is highly aligned with but is different from the Financial Action Task Force’s list of jurisdictions under increased monitoring (known as the FATF grey list).
How long has the Cayman Islands been included on the EU AML list?
The Cayman Islands was placed on the EU AML List following a decision made by the European Commission on 21 February 2022, via a delegated regulation that came into force on 13 March 2022. Therefore, it has been almost two years.