Cayman’s regulatory framework is continuously evolving to ensure it meets the needs of market participants and their clients and investors.
The Cayman Islands’ regulatory framework is continuously evolving to ensure it meets the needs of market participants, their clients and investors. The Cayman Islands has continuously amended its anti-money laundering, 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). The Cayman Islands 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.
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 recently proved to be useful for emerging 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. This framework continues to develop with proposed amendments to the VASP Act in the pipeline and, in May 2024, the Cayman Islands Monetary Authority issued the Regulatory Policy – Registration or Licencing of Virtual Asset Service Providers.
Following industry consultation, in December 2023, the Beneficial Ownership Transparency Act was gazetted and it is expected to come into force in summer 2024. This new Act updates the Cayman Islands' beneficial ownership reporting regime in line with international standards and the FATF recommendations.
