Update

Regulatory Law Update - Cayman Islands - Q3

Welcome to our third Regulatory Law Update for the Cayman Islands for 2017. The aim of the update is to focus on legal and regulatory developments which affect financial institutions. We hope you find the update valuable.

Revised AML Regulations Published

New Anti-Money Laundering Regulations (the Regulations) were published on 20 September 2017 and will replace the Money Laundering Regulations (2015 Revision) with effect from 2 October 2017. The new Regulations represent a complete revision of the previous version and, in particular, incorporate a risk-based approach to the mitigation and combatting of money laundering and terrorist financing, enhancements for addressing high risk scenarios and strengthened sanctions for any breach, in line with the Financial Action Task Force 40 Recommendations of February 2012.

Ongoing CRS and US FATCA deadlines

The first deadline for CRS and US FATCA reporting to the Cayman Islands Tax Information Authority was 31 August 2017, in relation to the reporting year 2016.

Navigating ongoing US FATCA and CRS obligations may not seem straightforward. We have created a quick guide for Cayman Financial Institutions to help you understand the ongoing deadlines for both CRS and US FATCA notification (registration) and reporting to the Cayman Islands Tax Information Authority, which can be accessed here.

Pursuant to an industry advisory dated 30 August 2017, the Department for International Tax Cooperation in the Cayman Islands announced that the AEOI Portal would remain open until 13 September 2017 to accept late registrations, variations and reports. However, the deadline remained 31 August 2017, so any submissions made after that date would still be late.

Revised Intellectual Property Laws

During 2016, initial steps were taken by the Cayman Islands' Government to reform its intellectual property laws and on 1 August 2017 three new laws came into force: the Trade Marks Law 2016, the Design Registration Law 2016 and the Patents and Trade Marks (Amendment) Law 2016.

These laws modernise the Cayman Islands' intellectual property regime:

• The Trade Marks Law 2016 creates a stand-alone trademark regime for the Cayman Islands (previously, trade mark law in the Cayman Islands operated as an extension of the UK trademark regime).

• The Design Rights Registration Law 2016 allows owners of UK registered designs and registered EU Community designs to extend their rights to the Cayman Islands.

• The Patents and Trade Marks (Amendment) Law 2016 updates the Patents and Trade Marks Law 2011 to reflect the new Trade Marks Law. It also implements anti-trolling provisions to prevent abuse of the patent registration process by patent trolls, who hold and vexatiously enforce patents in order to profit through licensing and litigation.

For further information about the new laws, please read our July 2017 briefing, which can be viewed here.

As a registered IP agent affiliated with CIIPO, Mourant Ozannes is happy to assist with any intellectual property related queries and the application and registration of intellectual property rights.

It is expected that the Government will produce further regulations supplementing this legislation in due course. We shall provide a further update when this occurs.

Data Protection Law overhaul

The Data Protection Law 2017 was gazetted on 5 June 2017 and is now expected to come into force in January 2019.

Our briefing note explaining the purpose of the Data Protection Law 2017 and summarising its terms can be found here.)

A Data Protection Working Group has been tasked with developing Regulations to accompany the Law by March 2018. A general public consultation (subject to approval by the Cabinet) is also expected to take place in due course.

All current and future "Data Controllers" should take this implementation phase as an early opportunity to begin reviewing their current personal data practices with a view to implementing and/or updating policies and procedures in good time before the new Law comes into force.

Reminder - Beneficial Ownership Requirements

Legislation requiring companies incorporated or registered in the Cayman Islands to maintain a register of beneficial owners came into force on 1 July 2017.

Proposed amendments to key statutes in connection with the introduction of the beneficial ownership register (BOR) requirement were circulated on 21 September 2017. The proposed changes (which are Bills and not yet in force) will identify additional categories of legal entities to whom the BOR requirement does not apply.

For further details about the BOR, including which entities are caught by the new requirement, timing and next steps, please see our previous client briefing here.

Cayman Islands receives positive peer review by OECD's Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum)

The Cayman Islands remains committed to combatting terrorist financing and money laundering. As a leading financial centre it continues to be at the forefront of industry developments and has a comprehensive anti-money laundering regime.

This was reflected in a report from the Global Forum on 21 August 2017, when it published the first ten outcomes of its newly enhanced peer review process. The focus of its assessment was the availability of, and access by tax authorities to, beneficial ownership information for all legal entities, in line with the Financial Action Task Force international standard. The Cayman Islands was rated (together with Australia, Bermuda, Canada, Germany and Qatar) as "largely compliant".

The assessors recorded that "the Cayman Islands received 161 requests over the review period and was able to exchange all of the requested information with the exception of one case where the information was not maintained in the Cayman Islands." While the Cayman Islands was deemed to have "a solid legal framework which is presided over by the Registrar and the financial regulator", a specific recommendation was issued "to monitor the newly introduced legal requirements to ensure that beneficial ownership information is available for all entities".

The assessors concluded that "peer input was very positive and is also demonstrative of the Cayman Islands continued efforts and commitment to the standards for the exchange of information on request".

First Ombudsman Appointment

Ms. Sandy Hermiston, previously General Counsel for the Ombudsman and Public Interest Commissioner for Alberta, Canada, has been appointed as the first Ombudsman of the Cayman Islands, a position created by the Ombudsman Law, 2017 (the Law). Certain provisions of the Law came into force on 13 September 2017.

The office of the Ombudsman is empowered to deal with appeals or complaints against all public bodies (including statutory authorities, civil service and government companies) and government ministries. It also has responsibility for the administration of the Data Protection Law 2017 (referred to above), the Whistle-blowers Protection Law 2015 and the Police (Complaints by the Public) Law 2017. In relation to the latter, it will act as an independent body on behalf of the police, overseeing the receipt and investigation of complaints made by the public.

CIMA's Amended Regulatory Handbook Update

In August 2017, the Cayman Islands Monetary Authority (CIMA) updated its Regulatory Handbook (the Handbook). A copy of the updated Handbook can be found here.

The Handbook has been revised to reflect current law and practice and is now more user-friendly. Key updates include: on-site inspections of licensees, the role of examiners, the content of written inspection reports and the procedure to monitor and ensure compliance with any recommendations resulting from an on-site inspection.

The role of examiners: One of the primary roles of examiners is to assist CIMA with the identification of weaknesses and deficiencies in licensees' controls and systems.

Following an on-site inspection, continuing off-site inspections (as described in more detail below) will monitor the licensee's progress in implementing any remedial requirements arising from the on-site inspection, placing the examiners in a position to determine whether or not the licensee is compliant.

Inspection Reports, MRIAs and MRAs: An on-site inspection will result in the production of an inspection report (a Report). The key objectives of a Report are (1) to inform CIMA and the licensee's directors and management of any matters requiring attention and their priority, and (2) to assist the licensee to correct those matters in a timely manner. A Report must:

 identify matters requiring immediate attention (MRIA), which will be given high priority, and matters requiring attention (MRA), which will be given medium or low priority; and

 provide instructions to correct any MRIAs or MRAs.

MRIAs identified by an examiner will need to be addressed by the licensee immediately; i.e, generally within 3 months, unless extended with the consent of CIMA. MRAs will need to be addressed within a time-frame specified by CIMA, usually within six weeks for medium priority MRAs and within twelve weeks for low priority MRAs.

The Handbook specifies the findings which are likely to be categorised as MRIAs or MRAs, with the key distinction between the two being the nature and severity of the matters requiring corrective action and the timeframe for ensuring compliance.

Mourant Ozannes would be pleased to assist with any questions or advice in relation to the matters outlined above. For more information, please contact a member of our Financial Services & Regulatory team.

This update is only intended to give a summary and general overview of the subject matter. It is not intended to be comprehensive and does not constitute, and should not be taken to be, legal advice. If you would like legal advice or further information on any issue raised by this update, please get in touch with one of your usual Mourant Ozannes contacts.

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