Cayman Islands: Law of Offshore
Cayman Islands banks need to be licensed under the Banks and Trust Companies Law (2009 Revision) (formerly the Banks and Trust Companies Law 1995, as amended in 2001 and 2003). Banking licenses are Class A, Class B restricted or Class B unrestricted:
- Class A licenses permit full domestic and offshore banking;
- Unrestricted Class B Trust Licenses permit full offshore banking with an unlimited number of customers and require a minimum net worth of USD400,000;
- Restricted Class B licenses require a minimum net worth of only USD20,000, but a list must be provided to the Inspector of Financial Services of the clients with which the bank intends to do business, and the list cannot change without further notification to the Inspector. Licensees do not need to be Cayman companies; but foreign licensees will probably have to provide a head office guarantee. All applications include considerable amounts of administrative and financial information.
Continuing supervision is exercised by the Monetary Authority. Quarterly returns and audited annual statements must be lodged. Share transfers, and changes to directors and officers must be authorised. Banks with unrestricted licenses are required to adhere to the Basle Convention Rules.
Banking confidentiality is well-established in Cayman through the common law, and is also enshrined both in the Banks and Trust Companies Law 1995 and in the Confidential Relationships (Preservation) Law 1995. Banking staff and government officials face civil and criminal sanctions if information is disclosed without authorisation. A number of laws permit the enforcement of foreign judgements or the disclosure of information in response to a court order, but normally in the context of criminal activity and drug use or dealing.
The Proceeds of Criminal Conduct Law, originally passed in 1999, was strengthened in 2000, and requires depositors to provide banks with due diligence documentation - a passport or driving license, proof of their physical address, and an outline of their banking activities. Reaction to the new requirements was mixed: in 2003, as a deadline for conformity with the new requirements drew nearer, Tim Godber, President of the Cayman Islands Bankers Association admitted that he was bemused by objections, saying: 'I really don't understand why people think the request is onerous. Account holders who might have obtained their funds illegally would be putting us at risk, so I think it only fair that we are allowed (to) ascertain for certain the identity of our account holders, and other important information about how they will use the account.' But local attorney-at law, Michael Alberga argued that: 'Privacy is the key to democracy, it's what separates democracy from other forms of government. Why should people who have lived and banked here all their lives have to provide more information about themselves?'
A Bill to Repeal and Replace the Proceeds of Criminal Conduct Law (2007 Revision); to Consolidate the Law relating to the Confiscation of the Proceeds of Crime and the Law Relating to the Mutual Legal Assistance in Criminal Matters; and for Incidental and Connected Purposes was tabled in the Legislative Assembly in 2008. This has brought about the new Proceeds of Criminal Conduct Law (PCCL), 2008, which was approved in June 2008.
The 208-page law expands the scope of legislation originally enacted in 1996 and revised several times since. It is based largely on the UK Proceeds of Crime Act 2002 and largely incorporates amendments made to the UK's Serious Organised Crimes and Police Act 2005.
It is one of Cayman's two main statutory means of dealing with confiscation of the proceeds of crime, the other being the Misuse of Drugs Law and the related Misuse of Drugs (Drug Trafficking Offences) (Designated Countries) Order 1991.
Attorney General, Samuel Bulgin explained that in addition to consolidating the different money laundering provisions currently found in different pieces of legislation, the revamped PCCL contains, for the first time, a civil forfeiture component. This means that the Attorney General is able to bring civil proceedings in a court to confiscate property that is obtained through unlawful conduct (civil recovery). This is an entirely new provision and makes it less onerous to obtain a confiscation order as there is no need to first obtain a criminal conviction.
According to the Attorney General the harmonised money laundering legislation "is robust and accords with the international standards and best practice". He declared that is generally be equivalent to the money laundering measures of the countries listed in the recently published European Union "White List".
The new law is one of the several recommendations made by the International Monetary Fund (IMF) in its report on the Cayman Islands released in 2005. The new law also contains provisions for the Summary Court, in addition to the Grand Court, to make confiscation orders and to criminalise certain lifestyles.
Provisions governing the powers, duties and functions of the Financial Reporting Authority and the Anti Money Laundering Steering Group remain unchanged.
However, the new legislation strengthens confiscation and restraint orders. Certain confiscation order procedures are now mandatory; the Grand Court must proceed with them when asked by the Attorney General.
A restraint order has the effect of freezing property that may be liable to confiscation following a trial and the making of a confiscation order, the Attorney General said. Currently, a restraint or charging order may be made only by the Grand Court under certain circumstances. The new law abolishes as unnecessary the power of the Grand Court to make a charging order.
Also, the point at which a restraint order may be made is to be brought forward to any time after the start of an investigation. Previously it was possible only where charges were anticipated within a period of 21 days.
Another notable feature is the broadening of compensation provisions under certain conditions. It has also become possible for the Attorney General to request an asset freeze abroad before any restraint order is made in the Islands, should conditions for making such an order be satisfied. Additionally, the definition of criminal conduct has been expanded, with no restriction on the type of criminal offence to be dealt with under the new law. "The Grand Court would only need to consider whether the defendant has benefited from any conduct which is, or would be, contrary to the criminal law of the Islands," the Attorney General explained.
He noted the new law also expanded the scope for international cooperation to a larger number of countries beyond those currently designated. Additionally, the law addresses, "in a comprehensive way, all the weaknesses identified by the IMF and the FATF (Financial Action Task Force) regional offshoot - the Caribbean FATF - in their evaluation report," he added.
The bill underwent extensive public consultation.