Cayman Islands Financial Services

The government of the Cayman Islands has recently announced that it is planning to develop legislation with a view to regulate the way personal information is collected and processed by businesses and organizations.

This step will be taken in order to ensure that data privacy is maintained. Also, the new legislation will ensure that individuals are able to access their own personal information held by government entities and private sector groups. The accuracy of such data will be required.

A data protection working group has been appointed by the Cabinet and met in order to consider a framework for introducing such legislation.

According to David Archbold, Chairman from the Information and Communications Technology Authority (ICTA), this group is currently reviewing laws from other jurisdictions that might be relevant to the local situation as well as is developing policy recommendations. He said that “The law will impose requirements on ‘data controllers’ to handle personal information fairly and lawfully.” Also, he noted that “Personal data may only be collected, used, stored and accessed for specified purposes, and must always be adequately safeguarded. Data controllers will be accountable for complying with these principles and liable for breaches, such as unauthorized use or disclosure”.

The group will submit its recommendations to the Cabinet Secretary and Attorney General for an approach to the introduction of such legislation In early 2010. Also, a paper on key issues will be prtepared by the group for public consultation.

The International Monetary Fund (IMF) has observed substantial progress made by the Cayman Islands in the sphere of financial sector regulation. This was stated in IMF’s latest report on the Cayman Islands.

Progress areas identified in the report include changes to legislation, rules and guidance to meet international standards, increases in the Cayman Islands Monetary Authority (CIMA) independence, resources and efficiency, and increased transparency of the funds sector reached by implementing CIMA’s electronic reporting system.

The report provides recommendations for enhancements in 10 areas but it acknowledges that they “are broadly consistent with the priorities already identified by the authorities and in most cases where policy action is already underway.”

The main recommendations of the report are as follows:
- strengthen the legislative structure for the independence of CIMA, beginning with passage of the pending draft amendments to the Monetary Authority Law;
- conduct a formal risk assessment and focus CIMA’s supervisory efforts more directly on the key risks facing the jurisdiction, such as operational and reputation risk;
- formalize and validate the assumptions underlying CIMA’s supervisory approach that relies on the strength of supervision applied elsewhere and the contribution of licensees and other domestic professionals to the oversight of financial intermediaries;
- formulate a robust framework for supervising licensees cross-border and cross-sectorally to help prevent regulatory arbitrage or supervisory gaps;
- draw up contingency plans to handle the failure of important institutions;
- make CIMA’s enforcement powers consistent across all administered legislation and set the monetary penalties high enough to make them effective and dissuasive;
- review the human resource budgeting policy and reassess the process regularly to ensure the continued adequacy and quality of regulatory resources;
- monitor international developments to ensure that the regulatory regime in the jurisdiction incorporates elements of international best practice as it evolves;
- enhance regulatory reporting and disclosure requirements of financial entities;
- implement a risk-based solvency regime for the insurance industry.

It should be noted that the report is based on information that was obtained on March 2-13 during the IMF’s mission to Cayman, as well as on consultations with CIMA. The mission aimed to review developments in the jurisdiction’s supervisory and regulatory framework since the 1st assessment in October 2003. These jurisdictional reviews are part of the Fund’s offshore financial sector assessment program.

The government of the Cayman Islands has announced that a comprehensive public service review will be launched in the middle of December. All government services, including those delivered by government companies and statutory authorities, will be scrutinized by review teams.

The 1st 4 government agencies that will be assessed are as follows:
Her Majesty’s Prison Service,
the Department of Tourism,
Public Works,
Cayman Islands National Insurance Company.

In order to form 4 Review Teams, 17 civil servants have been selected. Also, the private sector has been asked to provide support for the teams. The Teams are to be trained and developed by an external trainer. In January 2010, reports on the findings of the reviews are to be delivered.

This review is part of an agreement between the Cayman Government and the UK Foreign and Commonwealth Office and it follows the approval of Cayman’s borrowing request earlier in 2009.

On December 2, 2009, the Cayman Islands Legislative Assembly passed the Money Services Amendment Bill, 2009. This bill amends fees payable by financial services businesses.

The effect of the amending legislation, coupled with associated Regulations that the Cabinet passed on December 1, will be to:
- increase the annual license fee payable by money services businesses to KYD 10 000 (USD 12 345);
- introduce an annual fee of KYD 1 000 for each additional subsidiary, branch, agency or representative office that a money services business operates;
- introduce a new transaction fee payable to the government, equal to 2% of the gross amount transferred overseas by a money services business on behalf of its customers, but this fee cannot exceed KYD 10 per transaction.

Financial Secretary Kenneth Jefferson commented that “the Money Services Law makes it clear that banks, building societies and cooperative societies do not fall within its ambit”. So, wire transfers, drafts and overnight funds in the banking system are not subject to the new transaction fee.

When published in the Gazette, the bill will become law.