Cayman Islands 2020 regulatory recap for alternative investment vehicles

Leanne Golding & Kevin Huys


By Leanne Golding and Kevin Huys (pictured) – 2020 was a year unlike any in recent memory. We experienced ongoing disruptions to daily life due to the Covid-19 pandemic, ongoing tension surrounding the US election and a number of severe weather events. In the Cayman Islands, 2020 was also a very eventful year for regulatory and legal changes in the alternative investment industry. For those of you who were understandably distracted by other things, here’s a recap of the most significant changes affecting alternative investment funds which occurred over the past year.

The Anti-Money Laundering (AML) Regulations (2020 Revision)

The Cayman Islands AML Regulations and related Guidance Notes were amended during 2020 with a transition period that concluded 5 August, 2020. One key change for alternative investment vehicles was a change in approach to AML risk assessments, now requiring each financial services provider to do their own assessment of country or geographic area risk, rather than relying on the “Equivalent Jurisdictions” list that was previously maintained by Cayman’s AML Steering Group. This has resulted in additional procedures for those responsible for AML and may also necessitate changes to offering documents that reference the Equivalent Jurisdictions list. 

New DITC portal

The Cayman Islands Department for International Tax Cooperation (DITC) launched its new portal in November 2020. Functionality for CRS and FATCA Reporting, CRS Filing Declarations and New Entity Registrations opened on 12 November, 2020. In addition, each entity will need to file a new CRS compliance form covering the 2019 financial year, via the portal by 31 March, 2021. 

Private Funds Act 2020

During 2020, the much discussed Private Funds Act came into effect, requiring closed ended funds to register with CIMA by 7 August, 2020.  Amongst other requirements these funds must submit audited financial statements and a Fund Annual Return for their 2020 year-end. More than 12,000 funds registered with CIMA prior to the deadline.

CIMA administrative fines regime

In June 2020, revised administrative fine regulations were enacted expanding the scope and amount of fines CIMA can impose. The scope of fines were expanded beyond just AML matters. Breaches are categorised within the regulations as minor, serious or very serious and range up to USD1.2 million dollars. In November 2020, CIMA issued the first fine under the new regime. 

Rules on the contents of offering documents

In May 2020, CIMA issued detailed rules on the information that must be included in the offering materials of registered mutual funds and private funds. While the majority of the required information is already included in most documents the rules did include new mandatory disclosure wording regarding CIMA’s obligations to investors as a result of a fund’s registration.  

These matters have been broadly analysed by the Cayman Islands Financial Services Industry and many publications are available to help guide you through any required changes. If your funds are impacted and you have not previously addressed any of these regulatory changes, we recommend reaching out to your Cayman-based service providers as soon as possible. Wishing everyone a healthy and safe New Year and we are certain everyone is looking forward to turning the page in 2021! 

Leanne Golding and Kevin Huys are Directors of HTC Fiduciary Services Limited and officers of The Harbour Trust Co Ltd (together, doing business as Harbour), and are each responsible for providing fiduciary services to Harbour’s fund clients, including serving as independent directors for such funds.

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