New CIMA fines and TIA offence in force in the Cayman Islands

CIMA ADMINISTRATIVE FINES FOR REGULATORY LAWS, REGULATIONS AND RULES

The Monetary Authority (Administrative Fines) (Amendment) Regulations, 2020 was enacted on 26 June 2020 extending the ability of the Cayman Islands Monetary Authority (CIMA) to impose significant fines.

The Monetary Authority (Administrative Fines) Regulations (2019 Revision) and are referred to as the “Fines Regulations”. The Fines Regulations extend the application of the fines administered by CIMA from the anti-money laundering regime to all regulatory laws and regulations, and any rules issued by CIMA pursuant to those laws and regulations.

This new framework vastly extends the scope of CIMA’s authority and range. Any person or entity that breaches any clause of the laws and regulations listed below can be fined by CIMA. All entities that hold a licence issued by CIMA fall within the reach of CIMA’s new powers. In addition, entities registered with CIMA as a Registered Person, mutual fund or private fund (ie those conducting relevant financial business) as well as those registered as a director, are also now within the realm of this new framework.

Which regulatory laws and regulations are included?

The Monetary Authority Law accords CIMA the power to impose financial penalties under the Fines Regulations for breaches committed by persons (entities and individuals), under the following laws (and associated regulations and rules):

  • Anti-Money Laundering Regulations (Revised)
  • Banks and Trust Companies Law (Revised)
  • Companies Management Law (Revised)
  • Directors Registration and Licensing Law, 2014
  • Insurance Law, 2010
  • Money Services Law (Revised)
  • Mutual Funds Law (Revised)
  • Private Funds Law, 2020
  • Securities Investment Business Law (Revised)

How will CIMA issue and impose the fines?

Breaches are categorised as being ‘minor’, ‘serious’ or ‘very serious’. The Fines Regulations prescribe the process for provision of a breach notice to a relevant party which will give the entity an opportunity to rectify the violation prior to the fine being imposed. There will be a 30 day opportunity to reply to the breach notice and to rectify a ‘minor’ breach to CIMA’s satisfaction. If CIMA is not satisfied that a minor breach has been rectified, it is required to impose a fine. For ‘serious’ or ‘very serious’ breaches, CIMA has the discretion whether to impose a fine, and in what amount, up to the cap for the relevant category.

CIMA will have six months from becoming aware of a minor breach, or having received information from which the fact of the breach can be reasonably inferred, to impose a fine. There is a two year time limit in respect of the imposition of fines for serious or very serious breaches.

Where a breach is a statutory offence, ie non-compliance under a Law, the imposition of a fine will not preclude prosecution for that offence (or be limited by the penalty for that offence), and likewise any prosecution will not preclude the imposition of administrative fines or penalties.

The Fines Regulations also provide for the procedures relating to the imposition of the fines and consequences, including:

  • the criteria that CIMA must adopt when issuing breach notices, considering or reconsidering matters, if there is cause, and imposing discretionary fines;
  • when a party may apply to the Management Committee of CIMA to review an original decision to issue a fine notice for a fixed fine; and
  • when a party may apply to the Grand Court for leave to appeal against the original decision upon receipt of a fine notice for a discretionary fine.

How much are the fines?

There is a sliding scale of fines from CI$5,000 (USD6,100) for minor breaches to CI$100,000 (USD122,000) for individuals and CI$1 million (USD 1.22 million) for entities for very serious breaches. Fines for ongoing minor breaches can be imposed multiple times up to a cap of CI$20,000 (USD 24,000).

 

Entities registered with CIMA as a Registered Person, a mutual fund or a private fund, those conducting “relevant financial business”, and those persons or entities registered with CIMA as a director are also now subject to the updated Fines Regulations.

 

The update to the Fines Regulations reinforces the need for all licensees and registrants, subject to the AML regime and laws noted above, to know and understand their obligations including (but not limited to):

  • licensing and registration criteria, including filing deadlines;
  • CIMA rules and notification obligations (eg updates or changes to business plans, directors and officers, legal or beneficial ownership, registered and principal offices, auditors, offering materials, and licensing or registration information); and
  • maintaining appropriate systems and controls.

 

New TIA offence

Following the enactment of the Tax Information Authority (Amendment) Law, 2020, it is now an offence for knowingly or wilfully supplying false or misleading information to the Cayman Islands Tax Information Authority (TIA). A fine of CI$10,000 (USD12,200) and/or imprisonment for five years may be imposed on any person who commits such offence.

A number of key filings are made through the TIA, such as CRS and FATCA reports and other international exchange of information filings, and persons should be mindful of this new offence when completing these filings.

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