The Cayman Islands Government proposes amendments to the Proceeds of Crime Amendment

The Cayman Islands government published proposed amendments to the Proceeds of Crime Act (2020 Revision) (POCA) in the form of an amendment bill on 3 April 2023. POCA applies to residents of the Cayman Islands and any companies or partnerships incorporated or formed in the Islands. It is therefore something that anyone who owns or operates a Cayman Islands company or partnership should be aware of.

The bill has several objectives, including:

1. Improve the terms of POCA in the areas of intelligence gathering, sharing, and investigations
2. Protection for self-regulatory bodies against liability through their activities. This will mainly be of interest to sectors such as real estate
3. Conform to international best practices
4. Modernisation of prosecution procedures: This involves clarifying the evidential basis required to demonstrate that property is derived from criminal activities or obtained through unlawful conduct.
5. Enhanced powers for the Financial Reporting Authority (FRA) have been enhanced. If passed in its current form, the FRA will be able to disseminate information and analysis results at its own discretion or upon request to various entities, including competent authorities responsible for combating money laundering and terrorist financing (eg CIMA and CARA), supervisory authorities, and other institutions or persons designated by the Anti-Money Laundering Steering Group.

A notable change that is being proposed in the bill is the potential removal of the defences to committing the key money laundering offences [1] by making a Suspicious Activity Report (SAR) filing (either to an internal money laundering reporting officer or directly to the FRA). POCA in the Cayman Islands is based largely on the UK Proceeds of Crime Act 2002 and these defences have been integral to the regime in the UK and the Cayman Islands. The argument raised by the Government is that because the Cayman Islands, unlike the UK, does not have a consent regime in relation to SARs, that the existence of the defence makes little sense. However, most financial services providers, particularly banks, investment funds and any person that may assist with the flow of money for their clients, rely heavily on these defences when assessing their risk exposure and when dealing with customers. We understand that there are lobbying efforts being launched with Government. We believe that a better solution may be to resource the FRA or the financial crimes unit of the police appropriately and provide for a consent regime that matches the UK.

We will continue to monitor any further developments regarding these amendments and provide updates as necessary.

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[1] Concealing, disguising, converting or transferring criminal or removing criminal property from the Cayman Islands, entering into or becoming concerned in an arrangement which facilitates the acquisition, retention, use or control of criminal property or acquiring, using or having possession of criminal property.