Speaker: 00:00:07

Hello and welcome to the Regulatory

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15/15 podcast.

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My name is Adam Huckle,

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and I'm a partner

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in the Regulatory

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and Litigation teams here

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at Maples and Calder

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in the Cayman Islands.

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Joining me today

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is my fellow regulatory

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partner Don Mourginos,

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and one of our senior

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regulatory associates, Jo Ottaway.

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In this edition of the podcast,

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we will cover

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the latest developments

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in regulatory laws

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that have taken place

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in the Cayman Islands

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since the last 15/15 episode,

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which aired in October of this year.

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That will include

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CIMA surveys,

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a new sanctions

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reporting requirement,

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the VASP Regulatory Forum,

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plus year end reminders

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and a note on the FATF

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Fifth Round Review.

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A bit of housekeeping before we begin,

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please note

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that the contents of this podcast

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do not constitute legal advice

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and should be taken

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as a general update only.

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And also,

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please don't forget to subscribe

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and rate us on Apple Podcasts or Spotify.

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For timely regulatory

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updates across Cayman,

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the BVI, Luxembourg, Ireland and Jersey,

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visit our Regulatory Round-up

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blog at maples.com or click the link

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in this episode's description.

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And now over to you, Don.

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With, updates on

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two recent CIMA circulars.

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Thanks, Adam.

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Yeah, just a quick one.

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In October of this year,

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just a couple of days

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after our last 15/15

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podcast, CIMA

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published two interesting notices

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in relation

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to two separate sectoral service

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surveys,

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each of which had a

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31, October deadline.

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So they're all closed

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now, but it's worth mentioning

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that they occurred and talk about them,

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at at least at a high level.

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So the first survey,

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was the Cayman Islands Virtual Asset

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Sector Survey,

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which was conducted in collaboration

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with the office for Strategic Action

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on Illicit Finance.

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As part of the

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Cayman Islands National Risk

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Assessment for 2025 and 2026.

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This survey,

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sought to gather information

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from entities

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that are engaged in virtual asset,

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related activities,

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with the goal

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of improving the understanding

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of set

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the specific operations,

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exposures and associated risks.

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So I suspect that,

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quite a number of our clients,

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will have received this survey

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and hopefully completed the survey.

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So it will be interesting to see, once

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CIMA publishes

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some of their findings

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coming out of the survey

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and some of the results.

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So we wait to see for that.

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The second survey, was circulated

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by CIMA on behalf of the Ministry

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of Financial Services.

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Which is actually done in collaboration

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with the International Monetary Fund.

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In that survey,

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CIMA sought feedback on factors

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that may make

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the Cayman Islands

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vulnerable to money

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laundering and terrorist financing,

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through, legal persons

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and legal arrangements

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and the effectiveness of the measures

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that we currently have in place

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to mitigate these risks.

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This is all in the context of,

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the, the, the upcoming National Risk

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assessment for 2025 and 2026.

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So that's

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all I really wanted to say,

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on these surveys

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justified that they exist.

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They're closed now.

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So we wait to see some of the results.

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Adam,

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I think I'm throwing over to you

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to talk about the frozen

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asset reporting for 2025.

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That's right.

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Thanks, Don.

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There is a new sanctions

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reporting obligation

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for 2025 in the Cayman Islands.

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This is the first year of what's called

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the Annual Frozen Asset

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reporting exercise, or FAR.

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And that requires a Cayman Islands

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person that holds funds

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or economic resources

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that are owned, held

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or controlled

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by a designated person, i.e.,

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an individual entity sanctioned by the UK

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to file a report with the Financial

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Reporting Authority

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providing details of those frozen assets.

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Now the deadline for doing

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so is quite tight.

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It is on Sunday,

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the 30th of November of this year.

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And as I said,

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this will be an annual

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reporting obligation on the same date

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each year.

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That reporting obligation will,

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by way of non-exhaustive examples, apply

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to Cayman Islands banks

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that hold frozen cash,

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or to Cayman Islands investment

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funds that hold underlying assets

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that are frozen,

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either because the designated person

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has a legal or actual

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interest in those assets,

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or because the investment fund itself

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is deemed to be directly

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or indirectly owned by

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a designated person.

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Now, on the 6th

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of November of this year,

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the FRA published an explanatory note

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on the new FAR reporting regime,

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which is available on the FRA’s website,

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as well as the Cayman specific form

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which is in Excel format.

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And the reason I say

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Cayman specific form

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is this FAR

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reporting exercise

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is something that in the UK

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has been applicable to UK entities

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for several years.

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The reporting itself

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is relatively straightforward.

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The Excel includes

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details of the relevant frozen assets,

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including, importantly,

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confirmation of their value

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as at close of business

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on Tuesday, the 30th of September 2025.

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Other assets that you might hold

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that are frozen

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solely as a result of other jurisdictions

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sanctions laws.

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So US OFAC the EU, Canada, etc.

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do not form

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part of the FAR and of the FAR exercise,

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so don't need to be included

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and the completed report

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can be filed with the FRA

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simply by emailing it

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to financialsactions@gov.ky.

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If you would like, our

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expertise, we have significant experience

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in advising on Cayman Islands

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sanctions law.

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So please do reach out

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if you would like to check

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if you're in scope of this FAR exercise,

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or if we can be of any

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further assistance.

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Don, I'm hitting the ball back

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across the net to you.

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On your next topic.

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So another,

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kind of an industry update.

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Just a few days ago,

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CIMA hosted a VASP Regulatory Forum,

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for industry participants in person,

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as well as virtually.

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So, it's very interesting

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to see some of the topics

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being covered by CIMA

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they're very helpful indeed.

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So I thought useful

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just to cover off what,

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you know, our, our listeners,

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might find interesting

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coming out of that,

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there was a focus on

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the VASP registration

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application process itself.

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And CIMA,

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was was very helpful

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in identifying

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some of the recurring issues

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that they've noticed

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with, applicants filing

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registration applications.

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So,

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they highlighted that they've received

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some incomplete submissions.

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Some of the information

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they received didn't

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clearly show

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group structures

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and beneficial owners or,

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didn't include,

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some information

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that they necessarily need.

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So CIMA was,

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was very keen

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to make certain recommendations

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for applicants

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who are considering

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making an application.

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Engage

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early with CIMA. CIMA were very keen,

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in fact,

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it's it's a requirement

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of any registration application

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to engage with CIMA, discuss

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your plan, discuss your business.

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and it's only after CIMA,

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give it effectively

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giving you have given you the green light

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after that initial application

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or initial discussion with them

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that, a broader

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application should be made.

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When you are

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making your application for registration,

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be as transparent

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as you possibly can with respect to your,

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your group structures

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and any other jurisdictions

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that entities in your structure

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are regulated in.

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Ensure that you have three directors

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lined up.

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So at least one being independent,

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and having technical expertise

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in the area of virtual assets

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services

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that you are proposing

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to conduct yourself in.

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Ensure that your written policies,

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procedures are available, are in place

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and are provided to CIMA.

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Part of the application

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CIMA do require them

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upfront as part of the application,

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so have them ready.

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And be prepared to answer any questions

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that Sema have about the business itself.

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Obviously, Maples, we

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we have,

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great experience in helping clients

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with registration applications.

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So if that is, on your mind,

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if you are the assistance

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with respect to an application,

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in the best context,

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feel free to reach out.

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Another aspect that, CIMA did

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focus on,

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is kind of

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what's coming up in the future.

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So they highlighted some of the forms

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and AML forms that they have updated,

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which enhance the question

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and the question that they ask

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as part of the application process,

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00:08:36,782 --> 00:08:38,451

specifically with respect to AML.

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And they did ask that,

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entities that are registered

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00:08:44,924 --> 00:08:46,292

under the VASP regime,

311

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remind themselves of the,

312

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ongoing obligations

313

00:08:50,496 --> 00:08:52,265

that apply to VASP, in particular,

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an obligation to notify

315

00:08:53,666 --> 00:08:56,335

CIMA or indeed get pre-approval from CIMA

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00:08:56,335 --> 00:08:58,104

with respect to key officer appointments.

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So something to certainly be aware of.

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The other point,

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which I think is worth noting

320

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is that CIMA did confirm that all VASPs

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So all registered a licensed

322

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VASPs in the jurisdiction

323

00:09:09,315 --> 00:09:10,583

will be inspected

324

00:09:10,583 --> 00:09:12,018

before the next effect,

325

00:09:12,018 --> 00:09:15,655

the fifth round of FATF inspections.

326

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So, very useful to know

327

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that anyone

328

00:09:18,090 --> 00:09:20,059

who is registered or licensed as a VASP

329

00:09:20,059 --> 00:09:22,061

will be subject to senior inspection.

330

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So certainly worth

331

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preparing for that,

332

00:09:24,163 --> 00:09:25,498

making sure that all your policies

333

00:09:25,498 --> 00:09:27,533

and procedures are up to date.

334

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All your documentation is spick and span.

335

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Again, Maples can assist with,

336

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anything to do with that as well.

337

00:09:33,906 --> 00:09:35,308

So do feel free to reach out.

338

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So that's all I wanted to say about the,

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VASP Regulatory Forum.

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It's staying with me now

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because I think

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we wanted to just provide our listeners

343

00:09:43,049 --> 00:09:45,017

with a very quick reminder

344

00:09:45,017 --> 00:09:45,718

as we approach

345

00:09:45,718 --> 00:09:46,352

the end of the year,

346

00:09:46,352 --> 00:09:47,320

of all the various end

347

00:09:47,320 --> 00:09:48,220

of year obligations

348

00:09:48,220 --> 00:09:49,655

that come up in the regulatory space,

349

00:09:49,655 --> 00:09:50,256

in the Cayman Islands.

350

00:09:50,256 --> 00:09:53,159

So I'm sure our listeners are well aware,

351

00:09:53,159 --> 00:09:54,961

we're generally approaching,

352

00:09:54,961 --> 00:09:56,295

economic substance

353

00:09:56,295 --> 00:09:57,129

return filing

354

00:09:57,129 --> 00:09:58,030

for those entities

355

00:09:58,030 --> 00:09:59,398

that do have,

356

00:09:59,398 --> 00:10:00,566

or are relevant entities

357

00:10:00,566 --> 00:10:02,201

conducting a relevant activity

358

00:10:02,201 --> 00:10:04,236

that do have a, 31st

359

00:10:04,236 --> 00:10:06,038

December financial year end.

360

00:10:06,038 --> 00:10:07,707

We will be approaching the time

361

00:10:07,707 --> 00:10:08,507

for,

362

00:10:08,507 --> 00:10:10,076

filing your: 2024

363

00:10:10,076 --> 00:10:11,877

Economic Substance Return.

364

00:10:11,877 --> 00:10:14,547

So be reminded of that.

365

00:10:14,547 --> 00:10:16,449

Don't forget, again, Maples can assist

366

00:10:16,449 --> 00:10:17,817

with filing that return

367

00:10:17,817 --> 00:10:19,151

or answering any questions

368

00:10:19,151 --> 00:10:20,653

you have with respect to it.

369

00:10:20,653 --> 00:10:24,223

And, we've now

370

00:10:24,223 --> 00:10:24,957

passed the,

371

00:10:24,957 --> 00:10:26,626

the general, filing dates

372

00:10:26,626 --> 00:10:28,427

for that currency year.

373

00:10:28,427 --> 00:10:30,229

But a reminder about them

374

00:10:30,229 --> 00:10:32,031

nonetheless, because we have seen,

375

00:10:32,031 --> 00:10:33,799

a heightened level of activity

376

00:10:33,799 --> 00:10:35,735

from the DITC in issuing breach

377

00:10:35,735 --> 00:10:36,836

notices and penalty

378

00:10:36,836 --> 00:10:38,204

notices to clients

379

00:10:38,204 --> 00:10:38,771

who have

380

00:10:38,771 --> 00:10:40,306

missed reporting obligations

381

00:10:40,306 --> 00:10:41,240

or missed compliance

382

00:10:41,240 --> 00:10:42,375

form filing obligations.

383

00:10:42,375 --> 00:10:44,777

So do keep that on the radar.

384

00:10:44,777 --> 00:10:46,045

Put that in the calendar.

385

00:10:46,045 --> 00:10:47,713

Make sure we don't miss it. Yeah.

386

00:10:47,713 --> 00:10:48,848

So a couple of things there

387

00:10:48,848 --> 00:10:49,849

just to be aware of

388

00:10:49,849 --> 00:10:51,917

as we approach the end of the year

389

00:10:51,917 --> 00:10:53,185

and to keep things in the diary

390

00:10:53,185 --> 00:10:54,787

for regulatory obligations,

391

00:10:54,787 --> 00:10:56,455

going forward,

392

00:10:56,455 --> 00:10:57,490

as our last topic, I'm

393

00:10:57,490 --> 00:10:58,624

going to throw over to,

394

00:10:58,624 --> 00:11:01,193

my colleague Jo, to talk about,

395

00:11:01,193 --> 00:11:02,328

all the various ways

396

00:11:02,328 --> 00:11:04,463

that we're preparing for the

397

00:11:04,463 --> 00:11:05,631

FATF Fifth Round Review.

398

00:11:05,631 --> 00:11:07,066

Jo, over to you.

399

00:11:07,066 --> 00:11:07,967

Thanks, Don.

400

00:11:07,967 --> 00:11:08,668

Yeah,

401

00:11:08,668 --> 00:11:10,036

So our final update

402

00:11:10,036 --> 00:11:11,671

concerns the upcoming fifth

403

00:11:11,671 --> 00:11:12,471

round FATF

404

00:11:12,471 --> 00:11:13,973

mutual evaluation to be held

405

00:11:13,973 --> 00:11:15,941

at the end of 2027.

406

00:11:15,941 --> 00:11:17,476

So, as you may or may not be aware of,

407

00:11:17,476 --> 00:11:19,645

the Cayman Islands is actively preparing

408

00:11:19,645 --> 00:11:20,913

for the mutual evaluation,

409

00:11:20,913 --> 00:11:23,115

which will focus on the effectiveness

410

00:11:23,115 --> 00:11:24,116

of the Cayman Islands

411

00:11:24,116 --> 00:11:25,618

implementation of laws,

412

00:11:25,618 --> 00:11:27,253

regulations and other measures

413

00:11:27,253 --> 00:11:29,355

relating to anti-money laundering,

414

00:11:29,355 --> 00:11:30,856

counter-terrorism financing,

415

00:11:30,856 --> 00:11:31,891

counter- proliferation

416

00:11:31,891 --> 00:11:34,193

financing and sanctions.

417

00:11:34,193 --> 00:11:35,428

Now, CIMA has recently

418

00:11:35,428 --> 00:11:36,862

reactivated its blog,

419

00:11:36,862 --> 00:11:38,097

and it's encouraging

420

00:11:38,097 --> 00:11:39,865

all financial service providers

421

00:11:39,865 --> 00:11:41,267

to prepare for the upcoming

422

00:11:41,267 --> 00:11:42,968

mutual evaluation.

423

00:11:42,968 --> 00:11:44,870

In particular, CIMA is encouraging

424

00:11:44,870 --> 00:11:46,305

financial service providers

425

00:11:46,305 --> 00:11:48,007

to ensure that they have documented

426

00:11:48,007 --> 00:11:50,476

AML policies and procedures in place,

427

00:11:50,476 --> 00:11:51,410

and, importantly,

428

00:11:51,410 --> 00:11:52,545

that they can demonstrate

429

00:11:52,545 --> 00:11:54,947

the effectiveness of those mechanisms.

430

00:11:54,947 --> 00:11:56,248

And this would generally be

431

00:11:56,248 --> 00:11:57,717

by way of an AML audit,

432

00:11:57,717 --> 00:11:58,317

which,

433

00:11:58,317 --> 00:11:59,585

of course is a requirement

434

00:11:59,585 --> 00:12:01,821

under the AML regulations.

435

00:12:01,821 --> 00:12:04,223

CIMA is also encouraging board level

436

00:12:04,223 --> 00:12:05,991

awareness of the upcoming FATF

437

00:12:05,991 --> 00:12:07,993

mutual evaluation process,

438

00:12:07,993 --> 00:12:09,595

as well as participation

439

00:12:09,595 --> 00:12:11,630

and natural, sorry,

440

00:12:11,630 --> 00:12:13,199

as well as participation

441

00:12:13,199 --> 00:12:14,967

in national pre-evaluation

442

00:12:14,967 --> 00:12:16,769

initiatives and risk assessments.

443

00:12:18,070 --> 00:12:19,338

CIMA is also

444

00:12:19,338 --> 00:12:20,806

encouraging financial service

445

00:12:20,806 --> 00:12:22,808

providers to ensure that they have access

446

00:12:22,808 --> 00:12:24,543

to information, data,

447

00:12:24,543 --> 00:12:26,212

statistics and case studies

448

00:12:26,212 --> 00:12:27,346

for up to five years

449

00:12:27,346 --> 00:12:29,014

before the onsite inspection,

450

00:12:29,014 --> 00:12:29,682

which can

451

00:12:29,682 --> 00:12:31,417

validate the effectiveness

452

00:12:31,417 --> 00:12:33,419

of their practices.

453

00:12:33,419 --> 00:12:37,389

CIMA is also requiring financial service

454

00:12:37,389 --> 00:12:39,258

providers to be able to evidence

455

00:12:39,258 --> 00:12:40,092

that an entity

456

00:12:40,092 --> 00:12:41,627

wide risk assessment,

457

00:12:41,627 --> 00:12:43,596

including, as regards proliferation

458

00:12:43,596 --> 00:12:45,898

financing risks, has been conducted.

459

00:12:45,898 --> 00:12:47,500

And as with all risk assessments,

460

00:12:47,500 --> 00:12:48,400

the risk assessment

461

00:12:48,400 --> 00:12:49,635

must remain up to date,

462

00:12:49,635 --> 00:12:51,203

consider current, and evolving

463

00:12:51,203 --> 00:12:54,206

threats and sanctions requirements.

464

00:12:55,574 --> 00:12:56,108

Financial

465

00:12:56,108 --> 00:12:57,710

service providers should also ensure

466

00:12:57,710 --> 00:12:59,278

that there are adequate mechanisms

467

00:12:59,278 --> 00:12:59,745

in place

468

00:12:59,745 --> 00:13:01,313

for the collection, verification

469

00:13:01,313 --> 00:13:03,015

and retention of accurate

470

00:13:03,015 --> 00:13:04,650

beneficial ownership information

471

00:13:04,650 --> 00:13:06,685

for legal persons and legal arrangements

472

00:13:06,685 --> 00:13:08,687

which can be easily accessible

473

00:13:08,687 --> 00:13:10,022

when requested by CIMA

474

00:13:10,022 --> 00:13:11,323

or other authorities.

475

00:13:12,758 --> 00:13:14,527

And CIMA is also,

476

00:13:14,527 --> 00:13:16,796

requiring financial service providers

477

00:13:16,796 --> 00:13:18,364

to make sure that all staff

478

00:13:18,364 --> 00:13:19,932

are aware of recent amendments

479

00:13:19,932 --> 00:13:21,233

to AML legislation.

480

00:13:21,233 --> 00:13:22,601

So, for example, as regards

481

00:13:22,601 --> 00:13:25,104

the recent DAML consent changes,

482

00:13:25,104 --> 00:13:26,572

and that they are trained on

483

00:13:26,572 --> 00:13:27,273

any subsequent

484

00:13:27,273 --> 00:13:28,707

revised AML policies,

485

00:13:28,707 --> 00:13:30,810

procedures and controls.

486

00:13:30,810 --> 00:13:31,911

And lastly, CIMA

487

00:13:31,911 --> 00:13:32,678

is encouraging

488

00:13:32,678 --> 00:13:33,579

financial service

489

00:13:33,579 --> 00:13:35,548

providers to take a proactive approach

490

00:13:35,548 --> 00:13:36,582

to the upcoming

491

00:13:36,582 --> 00:13:37,383

national risk

492

00:13:37,383 --> 00:13:39,118

assessment of money laundering,

493

00:13:39,118 --> 00:13:40,953

terrorism financing and proliferation

494

00:13:40,953 --> 00:13:42,054

financing risks

495

00:13:42,054 --> 00:13:42,922

that will be conducted

496

00:13:42,922 --> 00:13:44,824

prior to the on site assessment.

497

00:13:44,824 --> 00:13:46,892

As the findings of the National Risk

498

00:13:46,892 --> 00:13:48,427

Risk Assessment will assist

499

00:13:48,427 --> 00:13:50,162

financial service providers

500

00:13:50,162 --> 00:13:51,764

in conducting their own entity

501

00:13:51,764 --> 00:13:53,666

wide risk assessments.

502

00:13:53,666 --> 00:13:55,100

So if you have any questions

503

00:13:55,100 --> 00:13:56,468

regarding the practical steps

504

00:13:56,468 --> 00:13:57,903

that your business should be taking

505

00:13:57,903 --> 00:13:59,638

to prepare for the FATF’s

506

00:13:59,638 --> 00:14:01,207

Fifth Round Mutual Evaluation,

507

00:14:01,207 --> 00:14:02,107

please do feel free

508

00:14:02,107 --> 00:14:03,375

to get in touch with us.

509

00:14:03,375 --> 00:14:04,577

We're very happy to help,

510

00:14:04,577 --> 00:14:05,778

and we have a range of tools

511

00:14:05,778 --> 00:14:07,213

that could be of assistance to you.

512

00:14:08,514 --> 00:14:11,217

Thank you.

513

00:14:11,217 --> 00:14:14,119

So that concludes today's episode.

514

00:14:14,119 --> 00:14:16,088

Thank you to my colleagues, Don and Jo

515

00:14:16,088 --> 00:14:18,190

for their very helpful contributions.

516

00:14:18,190 --> 00:14:19,692

And to our listeners,

517

00:14:19,692 --> 00:14:21,060

thank you for listening.

518

00:14:21,060 --> 00:14:22,261

If you've enjoyed the episode,

519

00:14:22,261 --> 00:14:24,230

please do rate us and subscribe,

520

00:14:24,230 --> 00:14:25,464

and we'll be back next month

521

00:14:25,464 --> 00:14:27,733

for another round of 15/15.

522

00:14:27,733 --> 00:14:28,634

And the meantime,

523

00:14:28,634 --> 00:14:28,901

please

524

00:14:28,901 --> 00:14:30,502

make sure to visit our Regulatory

525

00:14:30,502 --> 00:14:31,503

Round-up blog

526

00:14:31,503 --> 00:14:32,771

for timely regulatory

527

00:14:32,771 --> 00:14:34,139

updates at maple.com,

528

00:14:34,139 --> 00:14:35,941

or click the link

529

00:14:35,941 --> 00:14:37,977

in this episode's description.

530

00:14:37,977 --> 00:14:38,544

Many thanks.