The Financial Action Task Force's report on the Cayman's efforts to tackle terrorist financing and money laundering to be released next month will not be positive, the local government has warned.
The Cayman Islands has recently further amended its anti-money laundering (AML) guidance, effectively broadening the scope of entities that are subject to the Cayman Islands' AML laws and regulations. However, the task force has spotted deficiencies in how Cayman's rules and regulations are being followed in practice.
"It's not going to be a good report," premier McLaughlin told the local news outlet Compass. "It is going to find that we have some areas we need to improve on our anti-money laundering and counter-terrorist financing systems."
Unlike with other organizations such as the European Union, Cayman will not automatically be put on a blacklist or a gray list after a negative review. The jurisdiction will have a year before the FATF reviews it again to see what improvements have been made.
McLaughlin said he a committee has already been formed to address the FATF's perceived deficiencies. The Financial Reporting Authority, the Cayman Islands Monetary Authority, the Ministry of Financial Services, and other financial services-related government departments are set to receive more manpower and resources as the Cayman tries to comply with FATF rules.
As Cayman is one of the world's leading offshore jurisdictions, it is held to a higher scrutiny, he said.
"They don't even try to pretend anymore. Cayman is expected to operate at higher standards and have a greater scrutiny of the business that comes here than some other jurisdictions," the premier said. "It's a result of our success and the volume of financial services business that comes through the jurisdiction."
FATFA has recently been criticised for allowing "serious and substantial criticism" of UK authorities to be deleted before its glowing evaluation of the country's efforts in clamping down on dirty money
Global Witness, Corruption Watch and Transparency International allege that FATF risks undermining its reviews by permitting governments too much sway, and by not canvassing independent organisations for their appraisals on how well countries are fighting dirty money.