Cayman Islands: Know How Anti-Money Laundering 2023

Money laundering

1. What laws in your jurisdiction prohibit money laundering?

The primary law prohibiting money laundering in the Cayman Islands is the Proceeds of Crime Act (As Revised) (the POCA). The POCA defines money laundering and establishes offences relating to money laundering. There are no state, provincial or local laws separate from national laws in the Cayman Islands.

Other laws that assist in combating money laundering or similar, such as proliferation or terrorist financing, include:

• The Terrorism Act (As Revised) treats entering into or becoming concerned in an arrangement that facilitates the retention or control of terrorist property, whether by concealment, removal from the jurisdiction or transfer to nominees, as a money laundering offence.
• The Proliferation Financing (Prohibition) Act (As Revised) treats (i) providing funds and economic resources to fund unauthorised proliferation activities, and (ii) entering into or becoming concerned in an arrangement that facilitates the acquisition, retention, use or control of funds and economic resources to fund unauthorised proliferation activities, as a money laundering offence.
• The Misuse of Drugs Act (As Revised) criminalises and addresses dealing with proceeds from drug trafficking.
• The Anti-Corruption Act (As Revised) provides that the provisions of the POCA shall apply in relation to the proceeds of a corruption offence.
• The Anti-Money Laundering Regulations (As Revised) (the Regulations) provide for the implementation of anti-money laundering procedures by persons engaged in "relevant financial business" (as defined under the POCA).

2. What must the government prove to establish a criminal violation of the money laundering laws?

Under the POCA, the government must prove that the property involved is "criminal property". 'Criminal property' is defined by section 144(3) of the POCA, which states that property is criminal property if (i) it constitutes a person's benefit from a criminal conduct or it represents such a benefit (in whole or part and whether directly or indirectly), and (ii) the alleged offender knows or suspects that it constitutes or represents such a benefit, and includes terrorist property.

Further, the government must prove the remaining elements of the relevant offence. Section 144(10) of the POCA provides that money laundering is an act that:

• constitutes an offence under sections 133, 134 or 135. Section 133 makes it a money laundering offence if a person conceals, disguises, converts, transfers or removes 'criminal property'. Section 134 makes it a money laundering offence if a person enters into or becomes concerned in an arrangement that person knows or suspects facilitates the acquisition, retention, use or control of 'criminal property'. Section 135 makes it a money laundering offence for a person to acquire, use or have possession of 'criminal property';
• constitutes an attempt, conspiracy or incitement to commit an offence set out in sections 133, 134 or 135;
• constitutes aiding, abetting, counselling or procuring the commission of an offence specified in sections 133, 134 or 135; or
• would constitute an offence specified in paragraph (a), (b) or (c) above if done in the Cayman Islands.

The standard of proof is the criminal prosecution standard of proof (ie, beyond reasonable doubt).

3. What are the predicate offences to money laundering? Do they include foreign crimes and tax offences?

The POCA adopts a dual-criminality approach with respect to predicate offences to money laundering.

Sections 133, 134 and 135 define money laundering by references to actions taken in respect of "criminal property". Where "criminal property" constitutes or represents a person's benefit (in whole, part, directly or indirectly) from "criminal conduct" and the offender knows or suspects that it constitutes or represents such a benefit; and where "criminal conduct" covers any offence committed in the Cayman Islands or which would have constituted an offence if committed in the Cayman Islands (ie, a dual criminality test).

Predicate offences also include tax offences as set out in section 247A of the Penal Code (As Revised). That section provides that a person commits an offence if that person, with intent to defraud the government:

• wilfully makes, delivers or causes false or fraudulent information to be made to a person employed in the public service relating to the collection of money for the purposes of general revenue;
• wilfully omits information required to be provided to a person employed in the public services relating to the collection of money for the purposes of general revenue, where required by law; or
• wilfully obstructs, hinders, intimidates or resists a person employed in the public service in the collection of money for the purposes of general revenue.

4. Is there extraterritorial jurisdiction for violations of your jurisdiction's money laundering laws?

No, although that does not mean actions that occur overseas are irrelevant. A Cayman Islands established or registered entity or legal arrangement can be held accountable for the actions of its officers, employees and agents that are overseas on the basis that entity or legal arrangement is within the Cayman Islands jurisdiction.

However, the authorities in the Cayman Islands cannot, in the ordinary course, enforce their authority outside of the jurisdiction. However, they can, and do, give and receive information and mutual legal assistance in relation to criminal matters from certain specific countries under the Criminal Justice (International Cooperation) Act (As Revised) and the Mutual Legal Assistance (United States of America) Act (As Revised). Such legal assistance can include taking and providing evidence, executing searches and seizures, examination of objects and sites, identifying or tracing proceeds or property, freezing criminal property, assisting with forfeiture and restitution and facilitating the voluntary transfer of witnesses.

5. Is there corporate criminal liability for money laundering offences, or is liability limited to individuals?

There is corporate criminal liability for money laundering offences under the POCA. Section 142(1) of the POCA provides that:

Section 142(3) provides for criminal liability for partnerships and other unincorporated associations. It provides that:

The Regulations also provide for corporate criminal liability for breaches of the regulations. Regulations 57(1) and 57(3) are worded similarly to sections 142(1) and 142(3) of the POCA.

The Anti-Corruption Act, Terrorism Act, Proliferation Financing (Prohibition) Act, Misuse of Drugs Act all contain similar language providing for corporate criminal liability.

6. Which government authorities are responsible for investigating violations of the money laundering laws?

The Cayman Islands Bureau of Financial Investigations (CIBFI) and the Financial Crime Investigations Unit (FCIU) are responsible for investigating money laundering offences generally. Both agencies fall under the Royal Cayman Islands Police Service. The CIBFI is responsible for investigating crimes within the international financial sector of the Cayman Islands, while the FCIU is responsible for investigating domestic financial crimes within the Cayman Islands, including tracing, freezing and recovering the proceeds of crime. 

The Anti-Corruption Commission is given special powers to investigate bribery and corruption crimes.

7. Which government agencies are responsible for the prosecution of money laundering offences?

The Office of the Director of Public Prosecutions is responsible for all criminal proceedings brought within the Cayman Islands, including in relation to money laundering.

8. What is the statute of limitations for money laundering offences?

Section 141 of the POCA provides that a money laundering offence may be charged summarily or on indictment. There is no statutory limit in relation to an offence triable on indictment.

Section 78 of the Criminal Procedure Code provides that no offence, that is triable summarily, shall be triable by a Summary Court unless the charge or complaint relating to that offence is laid within six months from the date on which evidence sufficient to justify proceedings came to the actual or constructive knowledge of a competent complainant.

Fraud and deliberate concealment may extend the limitation period.

9. What are the penalties for a criminal violation of the money laundering laws?

Under section 141 of the POCA, a person who commits the offence of money laundering is liable:

• on summary conviction, to a fine of CI$5,000 (approximately US$6,100) or imprisonment for a term of two years, or to both; or
• on conviction on indictment, to imprisonment for a term of 14 years or to an unlimited fine, or to both.

10. Are there civil penalties for violations of the money laundering laws? What are they?

The POCA also allows for civil remedies. Section 77(1) provides that the Director of Public Prosecutions (the DPP) may bring proceedings before the court to recover property, which is, or represents, property obtained through unlawful conduct. It also allows for cash that is, or represents, property obtained through unlawful conduct, or which is intended to be used in unlawful conduct, to be forfeited in civil proceedings before a summary court.

The powers of the DPP in this regard may be used in relation to any property (including cash) whether or not any proceedings have been brought for an offence in connection with the property.

11. Is asset forfeiture possible under the money laundering laws? Is it part of the criminal prosecution? What property is subject to forfeiture?

Part IV of the POCA – "Civil Recovery of the Proceeds, Etc., of Unlawful Conduct" allows under section 77 for (i) the DPP to recover, in civil proceedings before the court, property that is, or represents, property obtained through unlawful conduct, and (ii) cash that is, or represents, property obtained through unlawful conduct, or that is intended to be used in unlawful conduct, to be forfeited in civil proceedings before a summary court.

Cash may also be forfeited under the POCA. Section 118 provides that while cash is detained, an application for the forfeiture of the whole or any part of it may be made to a summary court by the DPP. The court may order the forfeiture of the cash or any part of it if satisfied that the cash or part is "recoverable property" or that it is intended by any person for use in unlawful conduct. "Recoverable property" is defined in section 123 of the POCA as property obtained through unlawful conduct.

Section 27 of the Misuse of Drugs Act also allows for the forfeiture of cash that has been seized by a constable or customs officer where that cash directly or indirectly represents a person's proceeds of drug trafficking or is intended by a person for use in drug trafficking.

Further, section 192(1) of the Criminal Procedure Code (As Revised) provides that:

12. Is civil or non-conviction-based asset forfeiture permitted under the money laundering laws? What property is subject to forfeiture?

Yes.

Section 77(1) of the POCA provides that the DPP may bring proceedings before the court to recover property, which is, or represents, property obtained through unlawful conduct. It also allows for cash that is, or represents property obtained through unlawful conduct, or which is intended to be used in unlawful conduct, to be forfeited in civil proceedings before a summary court. Importantly, the powers of the DPP in this regard may be used in relation to any property (including cash) whether or not any proceedings have been brought for an offence in connection with the property.

Further, under 144 of the POCA, money laundering is directly linked to activities involving criminal property. Under section 144(4) it is immaterial who carried out the criminal conduct or who benefitted from it. English case law (R v Anwoir [2008] EWCA Crim 1354), which would be persuasive to the Cayman Islands court, has made it clear that there are two ways in which it can be shown that property derives from crime: "(a) by showing that it derives from conduct of a specific kind or kinds and that conduct of that kind or kinds is unlawful, or (b) by evidence of the circumstances in which the property is handled which are such as to give rise to the irresistible inference that it can only be derived from crime". Thus, a conviction is not necessary for there to be a determination that property is criminal property.

Anti-money laundering

13. Which laws or regulations in your jurisdiction impose anti-money laundering compliance requirements on financial institutions and other businesses?

The Regulations prescribe measures to be taken to prevent the use of the financial system for the purposes of money laundering and terrorist/proliferation financing. The Regulations require relevant financial businesses, as defined in POCA, to have in place Anti-Money Laundering (AML) or Combating the Financing of Terrorism (CFT)/Proliferation Financing (PF) policies and procedures for:

• customer due diligence;
• recordkeeping;
• implementing a risk-based approach;
• ongoing monitoring;
• complying with lists of targeted financial sanctions;
• internal reporting of suspicious activities;
• staff screening;
• staff training;
• internal controls;
• appointment of AML officers; and
• internal and external reporting.

More detailed compliance requirements for financial institution are found in the Cayman Islands Monetary Authority's Guidance Notes on the Prevention and Detection of Money Laundering, Terrorist Financing and Proliferation Financing in the Cayman Islands (the Guidance Notes).

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Originally Published by GIR

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.