The Cayman Islands are undergoing a significant regulatory transformation with the implementation of the 2023 Beneficial Ownership Transparency Act. Published in December 2023, this new legislation significantly broadens the scope of the beneficial ownership regime in the jurisdiction. After an extensive legislative process, the law officially came into effect on July 31, 2024, establishing stricter reporting requirements to strengthen the country’s compliance with international anti-money laundering (AML) standards, aligning with the recommendations of the Financial Action Task Force (FATF).
Amendments were made to the Companies Act, Limited Liability Companies Act, and others, expanding the scope of the beneficial ownership regime to cover limited partnerships, exempt limited partnerships, and foundations. As a result, these entities are now subject to reporting requirements. This measure was essential for aligning the Cayman Islands with FATF standards, leading to their removal from the list of jurisdictions with insufficient AML controls at the end of 2023. However, it’s important to note that the regime does not include trusts or foreign partnerships in its provisions.
One of the key innovations brought by the new law is the requirement to report the nationality of all Ultimate Beneficial Owners (UBOs), including any multiple citizenships, when applicable. However, it is not required to disclose all nationalities of the UBO; it is sufficient to indicate that the individual holds more than one citizenship.
Although the new legislation is already in effect, the Financial Services Ministry has temporarily suspended the requirement to submit beneficial ownership information, allowing entities time to adapt to the expanded requirements and reporting procedures. As a result, the sector is currently in a transitional phase. Experts believe that the Ministry will not require compliance with the new reporting obligations before January 1, 2025.
This temporary suspension provides a crucial adjustment period for newly covered entities, which will need to comply with the new regulatory obligations set forth by the law. The Financial Services Ministry is expected to issue further administrative guidelines in the coming months, providing greater clarity on the enforcement date of the new provisions, anticipated for 2025.
With the implementation of this new legislation and the temporary suspension of reporting, the Cayman Islands demonstrate a clear commitment to modernizing their regulatory framework, aiming to ensure greater transparency and compliance with international standards.
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Published on October 8, 2024