India, China added to list of KYC-friendly countries

The Cayman government has now included India and China on the list of countries that have laws and regulations in place considered to be equivalent to those of the Cayman Islands, with respect to the evidence of identity required from applicants for business. Mexico remains on the same list, despite the recent US Senate report which found that HSBC’s Mexican branch (HBMX) had accounts in the Cayman Islands believed to have links to organized crime. In July Mexican regulators imposed a fine of nearly $28 million on HBMX for not having sufficient anti-money laundering (AML) controls. Around the same time the Cayman Islands Monetary Authority announced an investigation into the apparent breakdown of AML procedures at the Mexican bank, but no results from that investigation have so far been revealed.

The US Senate committee released a damning 330-page report on 17 July on the failure of the London-based HSBC, Europe’s largest bank, to institute safeguards to prevent money laundering through some of its affiliates, which included a detailed investigation into HSBX and its Cayman Islands accounts. The committee found that the Cayman accounts had operated for years with lax anti-money laundering (AML) and Know Your Customer (KYC) controls and information. An estimated 15% of the accounts had no KYC information at all, which, the report stated, meant that HBMX had no idea who was behind them, while other accounts were, in the words of one HBMX compliance officer, misused by “organized crime”.

“CIMA has a long history and strong reputation of acting to ensure that the regulatory framework in the Cayman Islands is sound,” CIMA’s Managing Director Cindy Scotland said at the time. “We intend to continue, and moreover, enhance that reputation in light of the growing complexity and interconnectedness of the global financial services industry. “

Earlier this month Premier McKeeva Bush, who is also Minister of Finance, told members of the Legislative Assembly that CIMA was still in the process of conducting their investigations. “When those investigations are complete, a more comprehensive statement will be made on the matter,” he said.

Today the Ministry of Finance announced that the Third Schedule of the Money Laundering Regulations (2010 Revision) has been amended to include India and the People’s Republic of China. The Third Schedule of the Law specifies those countries that have laws and regulations in place considered to be equivalent to those of the Cayman Islands, with respect to the evidence of identity required from applicants for business. Any business incorporated in, or formed under, the laws of a country specified in the Third Schedule of these Regulations shall be capable of constituting the identification procedures deemed satisfactory by Cayman Islands law.

These amendments were approved by Cabinet and published in an Extraordinary Gazette Friday, 20 September 2012.