Cayman’s regulatory framework is continuously evolving to ensure it meets the needs of market participants and their clients and investors.
Cayman’s ability and readiness to pivot towards the needs of clients while remaining in line with global standards in financial services is a major reason for its success. The Cayman Islands has continuously amended its anti-money laundering, tax evasion, terrorist financing, proliferation financing and financial sanctions requirements to ensure it remains in line with developing global standards, in particular those of the Financial Action Task Force (FATF). Cayman is rated by FATF as being largely or wholly compliant with all 40 of the FATF recommendations on combating money laundering and the financing of terrorism and proliferation, which is a level of compliance that almost none of the EU member states, G20 members or other FATF members currently meet. Cayman policymakers and legislators are agile to the changing needs of clients, and the legal framework is continuously evolving to ensure it remains relevant to market participants, their clients and investors.
A beneficial ownership reporting regime was initially introduced in the Cayman Islands in 2017 in order to comply with international standards and commitments to combat money laundering, tax evasion and terrorist financing, and has since been updated in line with evolving global standards and the FATF recommendations (the beneficial ownership reporting regime). The beneficial ownership reporting regime requires: (i) each Cayman Islands company, limited liability company, foundation company, exempted limited partnership, limited partnership and limited liability partnership to, amongst other things, instruct its corporate service provider to establish and maintain a register of its registrable beneficial owners at its registered office, unless it can benefit from an alternative route to compliance; and (ii) the competent authority to maintain a centralised electronic platform on which this beneficial ownership information is stored. The beneficial ownership information stored on this platform is not publicly available but can be searched by the competent authority on its own behalf or on behalf, and at the request of, specified Cayman Islands regulatory authorities, regulated entities and foreign competent authorities. In addition, a limited category of persons are able to apply to the competent authority for access to beneficial ownership information in respect of a specific legal person where they have a legitimate interest and where there is evidence that such legal person is linked to financial crime. There are possible fines and imprisonment for breaching the beneficial ownership reporting regime.
The Tax Information Authority Act has been in place since 2005 and has enforced the laws and regulations necessary to implement the automatic exchange of information regimes. In 2016, the Limited Liability Company was introduced at the request of US clients. In 2017, the Foundation Companies Act was introduced, which provides clients with a flexible vehicle for offshore structuring. In particular, the Foundation Companies Act has proved to be useful for virtual asset businesses looking for corporate vehicles without traditional shareholders.
Following consultation with the Organisation for Economic Co-operation and Development (OECD), the EU and Cayman Islands stakeholders, the Cayman Islands and other international financial centres adopted economic substance requirements in 2019. Cayman was assessed by the OECD as fully compliant and continues to ensure compliance by updating its guidance accordingly (with the latest version being introduced in July 2022).
In 2020, the Cayman Islands amended the existing Mutual Funds Act and enacted a new Private Funds Act to provide a regulatory regime for smaller closed-ended investment funds. The Cayman Islands had already introduced legislative changes to allow the funds sector to participate in the EU’s Alternative Investment Fund Managers Directive.
Also in 2020, the Cayman Islands introduced the Virtual Assets (Service Providers) Act (VASP Act), which sets out the legal and regulatory framework for virtual assets service providers seeking to do business in and from the Cayman Islands. The VASP Act provides for a registration regime and licensing regime, which have been implemented in two phases. The registration regime came into force in 2020 and the licensing regime, which applies to virtual asset custody providers and virtual asset trading platform operators, came into force on 1st April 2025. The Cayman Islands Monetary Authority (CIMA) issued the Regulatory Policy—Registration or Licensing of Virtual Asset Service Providers in May 2024 and the Rule on Obligations for the Provision of Virtual Assets—Virtual Asset Custodians and Virtual Asset Trading Platforms in December 2024. It is expected that CIMA will issue further guidance on the new licensing regime under the VASP Act.
