CAYMAN ISLANDS Law and Practice Contributed by: Jason Ta, Ben Magahy, Paul Walters and Gemma Walters, Travers Thorp Alberga
business within the same legal entity as a regulated business; • for increased flexibility in the scaling of both the regulated and unregulated business lines; and • to ensure maximum flexibility on a potential exit of the businesses (which could be done at different times to different purchasers on different deal terms and – in the case of the unregulated business – without regulatory scrutiny of the purchaser of the business. 2.14 Impact of AML and Sanctions Rules Virtual asset service providers will be doing “relevant financial business” (see 2.11 Impli- cations of Additional, Non-Financial Services Regulations ) and will be required to comply with AML and sanctions rules. This requires them to perform KYC identity verification and (in some instances) source-of-funds checks on their customers. In traditional financial services industries, this has been the norm for many years – while for fintech companies this could impose significant additional regulatory costs, a loss of market share to unregulated entities in the Cayman Islands or in other jurisdictions, and a tension with their proposed business model and/or customer base. In addition, care should be taken with affiliates of virtual asset service providers, such as those facilitating real world asset tokenisation, as they may also be subject to anti-money laundering and sanctions rules even if they are not regulated as virtual asset service providers because they are deemed to conduct “relevant financial business” . Unregulated companies providing technology services will generally not be doing “relevant financial business” (see 2.11 Implications of Additional, Non-Financial Services Regula - tions ) and will therefore not be required to com - ply with the AML rules, however, the sanctions
regimes will still apply and so some form of KYC is generally undertaken. 2.15 Financial Action Task Force Standards The anti-money laundering and sanctions rules in the Cayman Islands generally follow the stand - ards imposed by the Financial Action Task Force (FATF). All Cayman Islands persons are required to observe Cayman Islands sanctions provisions (which are essentially the same as the sanctions provisions in the United Kingdom) extended to the Cayman Islands by statutory instruments. The list of sanctions regimes currently in force in the Cayman Islands is available on the Financial Under Cayman Islands law, there is no explicit reverse solicitation safe harbour, but as a general principle, the regulatory regime will only capture persons that have a Cayman Islands nexus (ie, either they are Cayman Islands persons or they are foreign persons soliciting business or mar - keting their business in the Cayman Islands). Reporting Authority website. 2.16 Reverse Solicitation 3. Robo-Advisers 3.1 Requirement for Different Business Models Cayman Islands law does not expressly contem - plate or regulate robo-advisers, although they could be regulated depending on how they are implemented. For example, if a robo-adviser platform was set up in order to provide invest - ment advice on securities to its customers then it would be regulated as a securities adviser under SIBA.
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