The words of the Financial Action Task Force (FATF) President T Raja Kumar last week about the urgency of the Cayman Islands to address “remaining action items” sounds eerily similar to the FATF’s previous statements about other countries. Concerning these other countries, the outcome of their continued failures to address action items resulted in them being categorized as high-risk jurisdictions. This led to several economic and other consequences, which the Cayman Islands may face if the remaining FATF action items are not addressed quickly.
Consequences
Regarding the consequences for the Cayman Islands, the FATF Plenary said, “the FATF will consider next steps if there is insufficient progress.”
Based on measures previously applied to other countries, such next steps may include:
The FATF issuing a public statement that the Cayman Islands is a high-risk jurisdiction and calling on FATF members to apply enhanced due diligence measuresThe FATF “urging” all jurisdictions to advise their financial institutions to give special attention to business relationships and transactions with the Cayman Islands, including Cayman companies, financial institutions, and those acting on their behalfThe FATF “urging” all jurisdictions to apply effective counter-measures and targeted financial sanctions to protect their financial sectors The FATF “urging” jurisdictions to terminate correspondent banking relationships
The impact could be widespread
If the FAFTF takes one or more of the above steps by summer 2023, the measures may impact business across the Cayman Islands.
For example, some international business partners may terminate relationships with Cayman companies or close their Cayman subsidiaries. This, in turn, could impact the jobs of ordinary hardworking people who are not actively involved in Government or policymaking to address weaknesses noted by the FATF.
FATF’s reasons
For those who are not familiar with the FATF, one of the reasons that the FATF may consider taking these steps (which may have drastic impacts) is “protect the international financial system from the money laundering, terrorist financing, and proliferation financing (ML/TF/PF) risks.”
Notwithstanding this explanation, a journalist covering EU government proceedings told Loop News that the measures are primarily “driven by politics.”
Whatever the truth, it is clear that measures, if applied by the FATF, can have far-reaching impacts. Therefore, the relevant Cayman stakeholders should take quick action before the FATF takes any further steps.
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