During the years 2000 and 2001, the Cayman Islands implemented a remarkable number of laws and amendments to key legislation.  The impact and importance of these changes have had a significant effect on the financial industry of the Islands.

The core legislation comprises the Proceeds of Conduct Law (2001 Revision) and the Money Laundering Regulations 2000.  In addition, and as a result of this core legislation, further laws have since been passed or amended, such as the following:

• Monetary Authority (Amendment) (Regulation of Non-Bank Financial Institutions) Law 2000
• The Money Laundering (Amendment) (Client Identification) Regulations, 2001
• Proceeds of Criminal Conduct (Amendment) (Financial Intelligence Units) Law 2001
• Banks and Trusts Companies (Amendment) (Prudent Management) Law 2001
• Insurance (Amendment) (Prudent Management) Law 2001
• Mutual Funds (Amendment) (Prudent Administration) Law 2001
• Companies Management (Amendment) Law 2001
• Building Societies (Amendment) (Regulation by Monetary Authority) Law 2000
• Co-Operative Societies (Amendment) (Credit Unions) Law 2000

• By virtue of the Companies Management (Amendment) Law 2000, the Cayman Islands Monetary Authority now has jurisdiction over previously exempted company managers.  Certain services that were not categorised as "Company Management" e.g. the provision of registered offices, incorporation of companies and filing of notices with the Registrar of Companies, now qualify as being company management services and can only be provided by a licensed entity.  There is also a provision to secure and immobilise bearer shares to ensure that client identity is certain.
• All entities that provide services relating to money transactions, cheque cashing, currency exchange and dealing in travellers cheques, if not licensed under the Banks and Trust Companies Law 2000, are now required to be licensed under the Money Services Law 2000.
• All financial institutions are now required to comply with the client identification and record keeping requirements in respect of all clients.  The previous exemption for existing clients as at 1st September 2001 is removed and therefore retrospective due diligence is required.  The deadline for completion is 31 December 2002.
• Banks with a B licence are now required to have a physical presence in the Cayman Islands including staff, books and records, to ensure accountability.
• The Guidance Notes were issued on the 26th April 2001 under the Money Laundering Regulations, which offer guidance to financial institutions regarding compliance with the Regulations.  The Guidance Notes supersede the Code of Practice, previously issued under the Proceeds of Criminal Conduct Law (2000 Revision), which has now been withdrawn.
• In general, the Cayman Islands Monetary Authority now has more power and authority to regulate, monitor and access information from service providers and to co-operate with overseas regulators.  Service providers are now required to keep far more detailed information pertaining to their clients, whilst failure to report suspicious transactions is a criminal offence.  Previously failure to do so was not an offence, rather if a suspicion was reported it provided a defence to a charge that the service provider had committed a money laundering offence.

Other amendments and new legislation passed during this period are:

Guidance Notes Amendment

In February 2002, the Guidance Notes were amended, most notably:- attorneys and accountants regulated in a country with equivalent legislation (schedule 3 countries) or; reputable accountants and/or lawyers meeting certain specified criteria including providing written assurance that they have obtained evidence of the identity of the person/entity being introduced and will provide copies of same on request and; members of a professional body subject to disciplinary procedures for failure to conduct relevant financial business in accordance with equivalent rules and guidelines to the Guidance Notes, may now qualify as a Qualified Introducer/Intermediary under the Guidance Notes.

Companies Law Amendment

The Companies Law 2001 Second Revision has been amended to allow exempted companies to be registered as exempted Segregated Portfolio Companies.  Such  companies will be able to operate segregated portfolios with segregated assets and liabilities in respect of each of its portfolios.  Mutual Funds for example will be able to protect the assets of each portfolio (Class) from the liabilities of the other portfolios.  Previously only insurance companies could establish segregated portfolios.

The Securities Investment Business Law

The above law applies generally to dealings in securities and managing and advising on securities.  The law will soon take effect pending a order by the Governor in Council, and will regulate all securities investment business conducted by any company or partnership incorporated or registered in the Cayman Islands or by any entity with a physical presence in the Cayman Islands.  There are some exceptions including but not limited to security investment business for sophisticated or high net worth persons or where such security investment business is an incidental part of the general business of the relevant entity with no separate remuneration in respect of providing the security investment business to which the law will not apply

International Management Services Ltd
P.O. Box 61, 
Harbour Centre
George Town, 
Grand Cayman, 
Cayman Islands 

Phone:  345 949 4244 
Fax:  345 949 8635 
Email: ims@candw.ky

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