Cayman’s regulatory framework is continuously enhanced to ensure it meets the needs of regulated entities and their clients and investors.
Cayman has taken the lead in raising standards of corporate governance across the financial services sector, which is one of the main priorities for global market participants. Cayman has also introduced a number of recent amendments to its anti-money laundering, terrorist financing, proliferation financing and financial sanctions requirements to ensure it remains in line with developments in global standards, in particular those of the Financial Action Task Force (“FATF”), and the implementation of the analysis of the Caribbean FATF in its Mutual Evaluation Report.
In 2016 the Cayman Islands Limited Liability Company (“LLC”) was introduced at the request of US clients. This was followed in 2017 by the introduction of the Foundation Companies Law. Foundation Companies function like a civil law foundation but in the form and with the benefits and familiarity of a company. This provides private clients with a flexible vehicle for offshore structuring, which even clients with a civil law background will be familiar with.
Following consultation with the OECD, the EU and Cayman Islands stakeholders, the Cayman Islands together with other international financial centres, adopted a series of measures to introduce economic substance requirements in 2019 to implement OECD best practices for combatting ‘base erosion’ and was assessed by the OECD as fully compliant. In addition, in 2020 the Cayman Islands Government amended the existing Mutual Funds Law and enacted a new Private Funds Law to provide a regulatory regime for smaller closed ended investment funds. The new regime will ensure that the Cayman Islands remains the offshore financial centre of choice for fund managers seeking to do business in Europe, and supports the Cayman Islands’ broader aim of adopting global standards in areas such as anti-money laundering and economic substance. The Cayman Islands had already introduced legislative changes to allow the funds sector the scope to participate in the EU’s Alternative Investment Fund Managers Directive (“AIFMD”).
More recently, the Cayman Islands has introduced the Virtual Assets (Service Providers) Law (2020) which sets out the legal and regulatory framework for virtual assets service providers seeking to do business in and from the Cayman Islands. The framework, which also introduces a “regulatory sandbox”, addresses the registration and licensing requirements for virtual asset service providers including exchanges and custodians.