Beneficial Ownership Transparency Act, 2023 (LG41, S1)

Following the removal of the Cayman Islands from the Financial Action Task Force’s (FATF) grey list in 23 November 2023, the Cayman Islands published the Beneficial Ownership Transparency Act, 2023 to advance its AML and CFT framework. Besides several amendments and improvements, the new law consolidates the beneficial ownership rules of the Companies Act, the Limited Liability Companies Act and the Limited Liability Partnerships Act into a single piece of legislation.
With the promulgation of the law, the Cayman Islands have met the commitment they made to the UK in 2019 regarding the establishment of public registers with information on beneficial owners.
„Over the course of 2024, the Ministry of Financial Services and Commerce will work with relevant stakeholders to allow the introduction of an enhanced beneficial ownership framework under the new Beneficial Ownership Transparency Act“, said Minister of Financial Services André Ebanks in a statement in the course of the publication. He further clarified, that „in conformity with the judgment of the Grand Chamber of the European Court of Justice (EUCJ) dated 22 November 2022 (WM (C-37/20 and Sovim SA (C-601-20) v. Luxembourg Business Registers), which held that a scheme for a public register of beneficial ownership offended the right to private life under the EU Charter of Fundamental Rights (which is materially similar to the right to private life protected by the Cayman Constitution and the European Convention on Human Rights), we are currently progressing to provide access to those members of the public who meet the “legitimate interest test” required by that case. This will include access to parties who are genuinely seeking information so as to prevent or combat money laundering and terrorist financing (for instance media and civil society organisations under specific circumstances per the EUCJ Judgment)“.
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The act outlines regulations related to the identification and disclosure of beneficial ownership information for legal entities and defines key terms such as „beneficial owner,“ „legal person,“ and „competent authority,“, as well as establishing the Minister responsible for financial services as the competent authority responsible for carrying out the functions outlined in the Act.
Legal persons falling under specific categories are required to provide written confirmation of their category and relevant particulars to their corporate services provider. These categories include listed entities, regulated entities, funds, exempted entities, and others not falling within the aforementioned categories. The Act specifies the required particulars for individuals and reportable legal entities, including full legal name, residential address, date of birth, nationality, and information from valid government-issued identification documents.
Corporate services providers are mandated to review and verify the provided particulars before entering them into the beneficial ownership register. They are also required to provide the competent authority with the necessary particulars at prescribed intervals. The Act further outlines the duty of corporate services providers to forward correspondence from the competent authority or Registrar to the relevant legal persons or individuals without delay.
The Act also addresses administrative fines and criminal penalties for non-compliance. The Registrar is empowered to impose fines for prescribed breaches, with the initial fine set at five thousand dollars and the possibility of additional fines for continuing breaches. Failure to pay fines within a specified period may result in the removal of the legal person from the register. Criminal penalties are stipulated for contraventions such as failure to issue required notices or providing false information.
The Act also includes provisions for the competent authority to issue guidance to assist with the interpretation of beneficial ownership and ultimate effective control, as well as for the Registrar to make rules regarding aggravating and mitigating factors in relation to the imposition of administrative fines and the publishing of details related to enforcement actions.