Cayman Islands
Last updated: 11/08/2008
CENTRAL AUTHORITY FOR REPORTING
ARE LAWYERS COVERED BY ANTI- MONEY LAUNDERING LEGISLATION?
Lawyers are covered by the Proceeds of Criminal Conduct Law (2001 Revision) (the “PCCL”) to the extent that they are involved in “relevant financial business”, such as giving advice about undertakings, capital structure, industrial strategy or M&A. Additionally, lawyers are subject to the provisions of the Terrorism Law, 2003.
Note that according to Padega, “it is widely believed in legal circles that lawyers in the Cayman Islands are governed under the laws of the countries from which they came. This means that lawyers who received their qualifications in the UK are governed by the rules of that jurisdiction, while those from Canada are governed by Canadian rules etc.” [1]
LAWS REGARDING ANTI-MONEY LAUNDERING PROCEDURES
IN ADDITION TO THESE LAWS, IS THERE ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS CURRENTLY IN PLACE?
The Guidance Notes on the Prevention and Detection of Money Laundering (September 2003) issued by the Cayman Islands Monetary Authority in conjunction with local associations (including the Cayman Islands Law Society) provide guidance as to best demonstrated practice. The Guidance Notes provide a fuller narrative on the means of implementing the relevant legislation and the practicalities of doing so. They also provide sector specific guidance although the legal profession is not one of the sectors covered.
UNDER WHAT CIRCUMSTANCES IS A LAWYER UNDER THE OBLIGATION TO REPORT?
When actual knowledge or suspicion of money laundering or terrorist funding comes to the lawyer’s attention in the course of carrying out his/her profession. However, litigation matters are not the subject of STRs. [1]
LAWYER RESPONSIBILITY/LIABILITY
To make an internal suspicion report to the firm’s Money Laundering Reporting Officer (MLRO). It is a requirement of the Money Laundering Regulations that all businesses that conduct relevant financial business appoint an MLRO. Upon receipt of an internal report, the MLRO is under an obligation to investigate and, if appropriate, make a Suspicious Activity Report (“SAR”) to the Financial Reporting Authority. The obligation to report suspicion is restricted to circumstances where the lawyer is conducting “relevant financial business”.
Failure to file a SAR could expose a lawyer who was aware or had suspicion of money laundering to potential criminal liability, which is soon to be two years’ maximum imprisonment and $5,000 maximum fine or both on summary conviction and 5 years maximum imprisonment and unlimited fine or both on indictment. [1] If the lawyer has filed an SAR prior to what otherwise would amount to acting in contravention of the PCCL, or does so after so acting but on his initiative and as soon as reasonable for him to do so, he will not commit an offence by those actions.
The penalty under the PCCL for use or acquisition of the proceeds of crime or assisting another to retain the benefit of the proceeds of crime is, if convicted summarily a fine of CI $5000 and imprisonment for 2 years and if convicted on indictment to a fine and imprisonment for 14 years.
Once a SAR has been filed, there still remains the possibility of criminal liability under “tipping off” provisions of the PCCL whereby it is an offence for anyone with knowledge or suspicion that an investigation is being or about to be conducted or an SAR has been filed to disclose information to any person which is likely to prejudice the investigation or any investigation that might be conducted.
CLIENTS IDENTIFICATION AND VERIFICATION
Client identification procedures must be in place to ensure under the Money Laundering Regulations evidence of a client’s identity is established as soon as practicable after a business relationship is formed which involves the conduct of “relevant financial business”.
The Guidance Notes provide assistance with standardisation of individual, company and partnership requirements.
Where business is being conducted on behalf of others, client identification procedures need to be applied to the ultimate applicant for business. However, if the intermediary is acting in the course of business in relation to which an overseas regulator exercises a regulatory function and is based in an approved jurisdiction, an Eligible Introducer’s certificate may be accepted in lieu of complete documentation. The certificate must state that copies of the due diligence material obtained by the intermediary are available on request.
Further, a number of exemptions are also permitted where the client is a regulated entity in an approved jurisdiction or listed on an approved market or exchange. The lists of these approved markets and exchanges and these approved jurisdictions are updated from time to time by the Cayman Islands Monetary Authority.
LAWYERS PROSECUTED FOR MONEY LAUNDERING OFFENCES
None as of yet.
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Sources
- Barbara Ann Padega, “Jurisdiction Update: Cayman Islands”, 4 August 2008. www.complinet.com.