Following the conclusion of the most recent plenary of the Financial Action Task Force ("FATF") on 27 October 2023, the FATF has announced that the Cayman Islands has been removed from the FATF's list of "jurisdictions under increased monitoring" (the "FATF Monitoring List") with immediate effect.
This follows an announcement by the FATF in June 2023 that the Cayman Islands had completed the final remaining item on its action plan. A successful onsite visit by the FATF to the Cayman Islands took place in September 2023, which is part of the FATF's standard process for removal from the FATF Monitoring List.
In its statement accompanying the announcement that the Cayman Islands is no longer subject to the FATF's increased monitoring process, the FATF has said that it "welcomes the Cayman Islands' significant progress in improving its AML/CFT regime. The Cayman Islands strengthened the effectiveness of its AML/CFT regime to meet the commitments in its action plan regarding the strategic deficiencies that the FATF identified in February 2021 related to (1) applying sanctions that are effective, proportionate and dissuasive, and taking administrative penalties and enforcement actions against obliged entities to ensure that breaches are remediated effectively and in a timely manner; (2) imposing adequate and effective sanctions in cases where relevant parties (including legal persons) do not file accurate, adequate and up to date beneficial ownership information; and (3) demonstrating that they are prosecuting all types of money laundering in line with the jurisdiction's risk profile and that such prosecutions are resulting in the application of dissuasive, effective, and proportionate sanctions".
By way of background, the FATF recognised at its February 2021 plenary that the Cayman Islands had satisfied 60 of the 63 actions on its action plan to strengthen its anti-money laundering, countering terrorist financing and countering proliferation financing measures that were prescribed in the Mutual Evaluation Report published in March 2019. Nevertheless, the FATF included the Cayman Islands in the FATF Monitoring List pending completion of the final three actions on its action plan given the Cayman Islands status as a major international financial centre. No penalties or sanctions resulted from being on the FATF Monitoring List and there is no requirement to apply enhanced due diligence measures to be applied to jurisdictions under increased monitoring.
Separately, the European Commission maintains a list of "high-risk third countries" ("EU AML List"), which typically includes the countries on the FATF Monitoring List. The European Commission added the Cayman Islands to the EU AML List with effect from March 2022, which we discussed in our February 2022 update. Now that the Cayman Islands has been removed from the FATF Monitoring List, removal from the EU AML List is expected to follow shortly, the EU having confirmed to the Cayman Islands Government that it does not require further measures beyond those of the FATF for removing the Cayman Islands from its list.
As a result of the Cayman Islands' progress in strengthening its framework and implementing the technical requirements of the FATF Recommendations, the Cayman Islands is now rated by the FATF as compliant or largely compliant with all 40 of the FATF's 40 Recommendations. Out of 161 countries assessed, only a handful of other countries have attained this standard.
The Cayman Islands removal from the FATF Monitoring List is a significant milestone in the jurisdiction's commitment to AML/CFT.
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