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Published 6th April 2022, 2:9pm

National Outreach
National Risk Assessment
18 March 2022

  1. To Members of the many industry associations represented here today, and fellow colleagues from the respective authorities, a pleasant good morning to you all. As Chairman of the Anti-Money Laundering Steering Group, it is my pleasure to present the opening remarks at this national outreach on the Cayman Islands second comprehensive National Risk Assessment.

  2. As many of you are aware, the first NRA was conducted in 2015 at a time when national and sectoral experience with the process was limited, and quite understandably, our understanding of risks across the regime was not where it should have been. This meant as well that the framework for combatting money laundering, terrorist financing, and proliferation financing was not as strong, as we were not adequately seized with the information necessary to help us engage additional supervisory, investigative, and prosecutorial resources and direct existing ones to those areas posing the most significant risks to the Cayman Islands.

  3. Being deficient in this way helped brought us within the increased scrutiny and oversight of the CFATF and the FATF. Following the CFATF mutual evaluation process, we were therefore placed in both enhanced follow-up by that body and increased monitoring by the FATF for strategic deficiencies in our AML/CFT/CFP framework, the latter of which we are still actively in today. The ICRG process in particular identified that more work can be done on our beneficial ownership framework, which is critically important given the international nature of our financial services industry.

  4. But we learned and continue to absorb lessons and insights from these processes. And so today, more than 5 years since the 2015 NRA, we have become reasonably adept at conducting ML/TF/PF risk assessments and understanding and mitigating our risks. It is no surprise then that the current NRA, the 2021 NRA, was done within the context of an AML/CFT/CFP environment that had been significantly upgraded to address identified gaps and risks.

  5. Not only have we increased national and sectoral understanding of ML/TF/PF risks, but we have also implemented the risk-based approach to AML/CFT/CFP supervision for all regulated financial and DNFBP sectors. AML/CFT/CFP supervisory coverage has been expanded to include dealers of precious metals and stones, real estate agents and developers, accountants, the legal profession, Securities and Investment Business Act Registered Persons, and virtual assets and virtual asset service providers. Supervisors were also appointed for these DNFBPs. Numerous legislative amendments were done to various pieces of laws, including the country’s primary AML/CFT/CFP laws—the Proceeds of Crime Act and the Anti-money Laundering Regulations—. The Monetary Authority Act, and the NPO laws were also amended to treat with issues related to administrative penalties and an oversight framework for NPOs, respectively. The Private Funds Act was enacted to bring private funds within the supervisory remit of CIMA.

  6. There were significant upgrades to the human and technological resources across the supervisory, investigative, and prosecutorial framework. Electronic filing of SARs filing was implemented. Financial intelligence has been enhanced, and the number of proactive requests and spontaneous disclosures made to overseas FIUs by the FRA have increased. Cross-border ML investigations have been enhanced with the establishment of the Cayman Islands Bureau for Financial Investigations (CIBFI). Since 2019, law enforcement has successfully restrained assets valuing over $520 million, and between 2018 and 2020, they have done a total of 6 confiscations in excess of $10 million.

  7. Some of these matters and other changes to the technical compliance framework resulted in the Cayman Islands being rated by the CFATF as having compliant or largely compliant on all of the FATF’s 40 Recommendations. At the time of the rerating, the Cayman Islands was one of only two countries in the world to accomplish this achievement.

  8. We should be proud of these accomplishments, but we must not rest too much on our laurels for there is much more work to be done. Risks are constantly evolving; what is a new or emerging risk today may not be in a few months. When the global risk profile for money laundering, terrorist financing and proliferating changes, so too will the development of rules, measures, and guidance to address them. And we will need to be in a position to respond swiftly and effectively to these new rules and calibrate our domestic risk profile accordingly.

  9. If we are to develop a world-class anti-money laundering and counter terrorist financing and proliferation financing regime, (and this must be our goal), we must be at the forefront of emerging risks and trend, and vigilant of existing ones. More importantly, we must be agile in identifying and mitigating any risks that threaten to disrupt the economic balance and financial stability of the Cayman Islands. This 2021 NRA helps us to continue doing just that.

  10. The 2021 NRA report was a multi-stakeholder initiative. It is the culmination of a great magnitude of work by both public and private sector stakeholders to evaluate the domestic framework for combatting money laundering, terrorist financing, and proliferation financing, with the ultimate objective of ensuring that we have an informed view of the risks to our financial system and borders. When we know and understand the threats to our financial and socioeconomic systems, and when we can clearly identify the weaknesses in our regime that can be exploited for illegality and illicit gains, we can appreciate not only our overall ML/TF/PF risks, but also understand those areas posing the greatest risks and that should be of national focus for resource allocation and remediation.

  11. In some respects, the NRA findings confirm some of what we already know. Our status as an international financial center with a vast array of sophisticated corporate and investment vehicles, and an equally abundant offering of innovative financial products and services, make us attractive in international markets. Unfortunately, this includes those bad actors who would seek to abuse our financial system, non-financial sectors, and corporate vehicles to hide and obscure their ill-gotten gains from foreign corruption, fraud, tax evasion or other crimes. Banks, real estate agents, lawyers, securities businesses and and trust and corporate services providers are particularly susceptible to abuse by these criminal elements. These sectors must therefore continue to be vigilant against these threats by continuously refining their compliance systems and broaden understanding of their risk exposure to customers, countries, and transactions, etc.

  12. We have also seen instances where our corporate vehicles were exploited to advance illegal interests. Admittedly, some of our legal persons are more exposed to risks of abuse than others. Supervisory and legal efforts are in place and underway to improve upon the regime to protect companies formed/ registered in the Cayman Islands from being used in furtherance of any illicit activities. We know that a strong beneficial ownership framework is critical to safeguarding against these abuses, and we are doing everything we can to make sure that we have such a framework.

  13. And finally, I cannot stress enough the role you in the industry have to play in moving the Cayman Islands AML/CFT/CFP regime from good to excellent, and in helping to ensure that we speak as one voice in our efforts to exit the ICRG process, and the greylist. We can ensure that compliance frameworks satisfy all required standards and are operationalized effectively. We can also ensure that adequate measures are put in place to prevent illegal actors from infiltrating and abusing our companies and services to engage in activities inimical to our national mandate of taking the profits out of crime.

  14. We are as strong as our weakest link; And so my charge to you, my charge to all of us is let us all be strong as active participants in the fight against money laundering, terrorist financing and proliferation financing.