Cayman Islands Regulatory Round Up - Winter 2024/2025 edition

KEY legislative DEVELOPMENTS

Changes to fees payable to the General Registry and to CIMA

With effect from 1 January 2025, General Registry fees were increased for a range of Cayman Islands entities.  The key revised annual fees are set out below:

In addition to increases in annual fees, various legislative amendments were made to provide for new or increased General Registry fees for administrative services and express fees.  All changes took effect from 1 January 2025.  The Ministry of Financial Services issued a press release in relation to the fee increases in December 2024 (available here).

CIMA updated its fee schedule, effective 1 January 2025 (available here).

Beneficial Ownership Regime

The Beneficial Ownership Transparency Act, 2023 and Beneficial Ownership Transparency Regulations, 2024 came into effect on 31 July 2024.  However, the Ministry of Financial Services and Commerce advised that no enforcement action would take place in respect of the new requirements until 1 January 2025.  All entities that are required to maintain a beneficial ownership register should now be in full compliance in order to avoid the imposition of administrative fines and penalties.  Please see our general Guide here.

Beneficial Ownership Transparency (Legitimate Interest Access) Regulations, 2024 (Legitimate Interest Access Regulations); and Beneficial Ownership Transparency (Access Restriction) Regulations, 2024 (Access Restriction Regulations)

Following an Industry consultation process, the Legitimate Interest Access Regulations were enacted which will allow for members of the public, who can evidence a legitimate interest, to access beneficial ownership information for a specific legal person where evidence is provided that the legal person is linked to money laundering or terrorist financing.  Individuals will be able to apply for protection from public disclosure pursuant to the Access Restriction Regulations where they believe their association with the legal person, if disclosed, will place them or an individual living with them, at serious risk of kidnapping, extortion, violence, intimidation, or other similar danger or serious harm.  The Access Restriction Regulations were gazetted on 9 December 2024.  The Legitimate Interest Access Regulations were gazetted on 19 December 2024 and will come into force on 28 February 2025.

On 21 November 2024 the Ministry of Financial Services issued a press release detailing the Cayman Islands’ position on beneficial ownership (available here).

Beneficial Ownership Transparency (Amendment) Act, 2025 (BOTAA)

The BOTAA was passed by Parliament on 6 February 2025.  The BOTAA amends the meaning of “beneficial owner” to clarify that where a trust meets one of the beneficial owner criteria, a trustee of the trust shall be identified as the contact person.  The BOTAA also:

• Empowers the competent authority to provide access to the search platform to the Customs and Border Control Service, among other entities;
• Introduces a new section that restricts access to information held on the beneficial ownership registers and stipulates that such information is exempt from disclosure under the Freedom of Information Act (2021 Revision), ensuring the confidentiality of search activities; and
• Provides for an additional exemption for entities registered as non-profit organisations under section 7 of the Non-Profit Organisations Act (2020 Revision).

Proceeds of Crime (Amendment) Act, 2023 (POCA Amendment Act)

Most provisions of the POCA Amendment Act came into effect on 31 January 2024 whereas sections 11, 12 and 13 concerning the offences of “concealing, etc”, “arrangements” and “acquisition, use and possession” came into force on 2 January 2025.  Up until that time, if a person suspected that property they intended to deal with was criminal property, they could make a suspicious activity report (SAR) and this would constitute a defence against committing a money laundering offence.  Now, in addition to filing a SAR, a person must also receive consent from the Financial Reporting Authority (FRA) prior to carrying out a relevant act in order to have a defence against money laundering (DAML).

On 13 January 2025 the FRA issued an Industry Advisory (available here) which introduces a deemed consent regime and provides instructions on submitting a DAML/ consent request.

The FRA has a 7 working day period (Notice Period) to consider a DAML request unless they consider the request to be incomplete in which case they will specify a longer Notice Period.  During this Notice Period, the activity that is the subject of the request should not be carried out.  If the FRA does not respond within the Notice Period, then DAML consent is deemed to have been given.  If a DAML consent request is refused by the FRA, a 30 day moratorium period will commence from the first working day after the FRA notification of the same.   Law enforcement action will be undertaken during this time.  Again, during the moratorium, the activity that was the subject of the original request should not be carried out for risk of carrying out a money laundering offence.

A revised and consolidated version of the Proceeds of Crime Act (2025 Revision) was gazetted on 13 February 2025.

Economic Substance

On December 23, 2024 the Cayman Islands Government published the International Tax Co-operation (Economic Substance) (Amendment of Schedule) Regulations, 2024. The amendments provide that the definition of “ultimate beneficial owner” for the purposes of economic substance should have the same meaning as “beneficial owner” in section 4 of the Beneficial Ownership Transparency Act, 2023.

In summary, this means an individual who (i) ultimately owns or controls, 25% or more of the shares, voting rights or partnership interests; (ii) otherwise exercises ultimate effective control over the management of the legal person; or (iii) exercises control through other means.  An individual would not be considered a beneficial owner/ ultimate beneficial owner where operating solely in the capacity of a professional advisor or professional manager.

Financial sanctions

General Licence 2022/0001 (Non-Designated Person): This licence permits a fund or an investment manager to redeem, withdraw or otherwise deal with an investment interest and make payments for basic needs, routine holding and maintenance and legal fees from frozen accounts. The licence which originally took effect on 4 October 2022 was amended on 5 April 2023 to extend to 5 October 2023; on 6 October it was further amended to extend to  6 October 2024 and on 16 October 2024 it was further extended to 16 October 2025. Apart from extending the timeline, there was no other change to the license terms. A copy of the license is available here.

General Licence 2024/0002 (Legal Services): The license permits, subject to certain conditions, the payment of reasonable professional legal fees (subject to a cap) and expenses (subject to a cap). This license took effect on 19 December 2024 and expires on 28 April 2025. A copy of the license is available here. The previous license in respect of legal fees GL/2024/0001 expired on 24 November 2024. The provisions of GL2024/0002 differ from the previous license; in particular the attorney’s fees and expenses caps have been increased and the Governor has introduced a restricted permission to pay into non-Cayman Islands bank accounts in the United Kingdom, Canada, any Member State of the European Union, any Member State of the European Free Trade Association or the United States.

2025 Horizon SCANNING

In this section, we look ahead to the trends and new requirements (published to date) that we may see over the next twelve months for clients operating regulated businesses.

Cayman Islands Legislative Update – Acts awaiting commencement

The Virtual Asset (Service Providers) (Amendment) Act, 2024 (not yet in effect) introduces significant changes to the regulatory framework governing virtual asset service providers (VASPs) in the Cayman Islands.

Key amendments now include:

• Revised Definitions and Terminology: The term “existing licensee” will be replaced with “supervised person” to broaden the scope of entities under regulatory oversight.
• Application and Fee Procedures: Applicants for registration or licensing will be required to pay the prescribed application fee upon submission. Upon approval, the respective registration or license fee will be due within 30 days; failure to pay will result in cancellation of the approval.
• Licensing Requirements for Custodial Services and Trading Platforms: VASPs offering custodial services or operating trading platforms will be required to obtain a specific license from CIMA.
• Entities already providing these services will have a 90-day window from the Act’s commencement to apply for the necessary license.
• Governance Enhancements: VASPs will be mandated to appoint a minimum of three directors, including at least one independent director, to strengthen governance structures.
• Operational Oversight: Any proposed changes to a VASP’s approved business plan or the introduction of new virtual asset services will require prior written approval from CIMA.
• VASPs will be required to inform CIMA within 30 days of any legal proceedings initiated against them in any jurisdiction, ensuring regulatory bodies remain informed of potential risks.
• Audit and Financial Reporting: VASPs regulated by CIMA will be required to have their accounts audited annually by an approved auditor and submitted to CIMA within six months after the end of the financial year, unless an extension is granted.
• Enforcement and Penalties: CIMA will be empowered to revoke licenses, impose conditions, or apply to the court for orders to protect clients’ or creditors’ interests if a VASP fails to comply with regulatory requirements.
• CIMA may also publish notices of contraventions in the Gazette and other official publications.

These amendments aim to enhance the regulatory oversight of VASPs in the Cayman Islands, aligning with international standards and promoting a secure and transparent environment for virtual asset services.

In addition, on 12 December 2024 the following regulatory measures in respect of VASPs were gazetted (but are not yet in effect):

Rule – Obligations for the provision of virtual asset services – Virtual Asset Custodians and Trading Platforms (available here).

Statement of Guidance – Guidance for the provision of virtual asset services – Virtual Asset Custodians and Virtual Asset Trading Platforms (available here).

How we can help

Keeping up to date with new and proposed legislation and regulations is an ongoing challenge for businesses. Our regulatory team monitors and analyses proposed and upcoming legislative and regulatory developments, to determine the practical implications for our clients.

Our regulatory team has seen increased demand from clients for advice on and assistance in complying with CIMA’s requirements and DITC requirements. During the course of 2024, we will continue to:

• Monitor Cayman Islands legal and regulatory developments;
• Produce client focused briefings and e-alerts tracking new developments;
• Contribute to various industry consultations covering legal and regulatory developments affecting our client’s businesses; and
• Provide training to clients to support their existing compliance framework.

Please get in touch if we can be of assistance.