Proliferation Financing (Prohibition) Law (2017 Revision)

Summary

This document is the consolidated 2017 Revision of the Cayman Islands' Proliferation Financing (Prohibition) Law, which implements United Nations Security Council anti-proliferation financing measures domestically. It empowers the Financial Reporting Authority (FRA) to publish lists of UN-designated persons and to issue 'directions' to persons operating in the Cayman Islands financial sector.

• Enhanced due diligence
• Ongoing monitoring
• Reporting
• Restriction or cessation of business with listed countries, persons or entities linked to proliferation risk (nuclear, chemical, biological or radiological weapons and their delivery systems)

Scope of Application

The law applies broadly to 'persons operating in the financial sector', defined by reference to a list of sector-specific laws, as well as to any specific 'relevant person' or 'listed person' named in an FRA direction. It also creates a standalone freezing obligation on anyone in the Islands holding funds or economic resources owned or controlled by a UN-designated person, independent of any FRA direction.

• Banks and trust companies
• Building societies
• Company managers
• Cooperative societies
• Insurers
• Money services businesses
• Mutual funds
• Securities investment business
• Licensed directors

Enforcement and Offences

The law establishes information-gathering and inspection powers for enforcement officers and a civil penalty regime. It also creates criminal offences for the following conduct:

• Failing to freeze designated persons' assets
• Failing to report frozen funds
• Failing to comply with a direction or information requirement
• Circumventing a direction

It also sets out procedures for de-listing designated persons and for the Cabinet to make implementing regulations.

Key obligations

• A person holding, controlling or dealing with funds or economic resources owned or controlled (directly or indirectly) by a UN-designated person must immediately freeze those funds or economic resources and ensure they are not made available, directly or indirectly, to or for the benefit of the designated person (section 2B).
• A person who has frozen funds or economic resources under section 2B must, as soon as reasonably practicable, disclose to the Financial Reporting Authority details of the frozen funds/resources or actions taken, including attempted transactions (section 2C).
• A relevant person given a direction by the FRA must undertake any enhanced customer due diligence measures specified, before and during a business relationship with a listed person (section 7).
• A relevant person subject to a direction must comply with any ongoing monitoring requirements imposed (section 8).
• A relevant person subject to a direction must comply with systematic reporting requirements imposed by the direction (section 9).
• A relevant person subject to a direction must restrict or cease business as required by the direction (section 10).
• A relevant person must comply with requirements to provide information or documents when required by an enforcement officer (sections 14 and 18).
• Persons must not knowingly or intentionally participate in activities designed to circumvent any requirement imposed by a direction (section 33).

Applies to

banks and trust companies, building societies, companies management businesses, cooperative societies, insurers, money services businesses, mutual funds, securities investment businesses, licensed directors (Directors Registration and Licensing Law entities), any person or class of persons given a direction by the Financial Reporting Authority (relevant/listed persons)

Deadlines

• immediately: A person holding funds or economic resources of a designated person must immediately freeze those funds/resources upon the freezing obligation arising under section 2B.
• as soon as reasonably practicable: A person who has taken freezing action under section 2B must disclose details to the Financial Reporting Authority as soon as reasonably practicable (section 2C).
• as soon as reasonably practical: The Financial Reporting Authority must disseminate any UN Security Council list of designated persons as soon as reasonably practical after publication (section 2A).