CAYMAN ISLANDS Law and Practice Contributed by: Daniel Lee, Sophia Scott, Kimberly Robinson and James Turner, Maples Group
Islands demonstrated its commitment to inter - national standards by satisfying all FATF Recom - mended Actions and successfully completing an on-site inspection by the FATF in 2023. On 12 December 2023, the European Commis - sion published Commission Delegated Regula - tion (EU) (the “Delegated Regulation”) amending Delegated Regulation (EU) 2016/1675 to update its list of ”high-risk third countries” (“EU AML List”) identified as having strategic deficiencies in their anti-money laundering/counter-terrorist financing (AML/CFT) regimes. The Delegated Regulation provides for the removal of the Cay - man Islands from the EU AML List. The Commis - sion consulted the EU’s Expert Group on Mon - ey Laundering and Terrorist Financing before adopting the Delegated Regulation. The Cayman Islands removal from the EU AML List was made effective on 7 February 2023. The removal from both the FATF and EU AML Lists affirms that the Cayman Islands has robust and effective AML/CFT/CPF regimes in place, reflecting the jurisdiction’s commitment to main - taining a compliant financial sector that aligns with global standards. Cayman Islands Sanctions Regime Sanctions Orders are extended by Statutory Instrument to the British Overseas Territories, including the Cayman Islands, to give effect to sanctions regimes implemented by the UK gov - ernment (“Sanctions Orders”). Sanctions Orders apply to any person or body incorporated or instituted in the jurisdiction, as well as any British citizen or subject ordinarily resident in the jurisdiction. The Sanctions Orders generally restrain persons from dealing in funds or economic resources owned or controlled by, or making funds or economic resources avail -
able to, persons or entities listed under the Order (“Designated Persons”). For example, a fund making a redemption payment to a Designated Person would not be permitted. Since March 2022, significant sanctions meas - ures with respect to Russia’s invasion of Ukraine have been published (and continue to be pub - lished) by the UK, USA and the EU. A number of Cayman Islands vehicles have been impacted by the sanctions regime as a result of direct or indirect exposure to Russian individuals and/or Russian entities (eg, where a shareholder in a Cayman Islands company is directly or indirectly controlled by a Russian sanctioned individual). While these entities have been able to apply to the Governor for a specific licence to permit an activity that would otherwise be prohibited by UK asset-freezing measures, until recently, licences could only be granted under one or more specified licensing grounds set out in the legislation. No licensing ground existed to deal with the difficulties Cayman Islands entities have faced regarding frozen investments held in Rus - sia and sanctioned investors on their registers. On 14 March 2024, however, a new divestment- specific licensing ground came into force may provide an opportunity for entities to apply for a specific licence to exit a frozen shareholder/LP and freeze the redemption/withdrawal proceeds in a frozen bank account in a British Overseas Territory or in the UK. Cayman Islands Country-By-Country Reporting The Tax Information Authority (International Tax Compliance) (Country-By-Country Reporting) Regulations (As Revised) (the “CbCR Regula - tions”) implement the requirements of the OECD/ G20’s Base Erosion and Profit Shifting Action 13 Report (Transfer Pricing Documentation and
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