Changes to the Cayman Islands Beneficial Ownership Regime

The Cayman Islands Government recently passed the Beneficial Ownership Transparency Regulations (2024) (the BOT Regulations). These Regulations provide implementation details of the significant updates made to the Beneficial Ownership regime under the Beneficial Ownership Transparency Act, 2023 (the BOT Act), bringing the legislative provisions of the BOT Act into practical effect.

Clients with in-scope entities should understand and assess how the changes will impact them, and previously out-of-scope or exempt entities may now be in-scope. Here’s what you need to know.

Overview of the Changes

In an effort to combat issues such as money laundering and tax evasion, the updated Beneficial Ownership regime, effective from 31 July 2024, aims to expand not only the scope of the types of entities covered, but also the nature of beneficial ownership reporting obligations for entities incorporated or registered in the Cayman Islands.

For more details, please refer to the final version of the Beneficial Ownership Transparency Guide released by the Ministry of Financial Services & Commerce.

Enforcement will not begin until 1 January 2025, allowing entities time to prepare for compliance.

Key Changes and Implications

Beneficial ownership

The definition of “beneficial owner” under the BOT Act has been amended to align with the definition used in the Cayman Islands Anti-Money Laundering Regulations (AMLR). Specifically, the AMLR defines a beneficial owner as the natural person who ultimately owns, controls or benefits from a customer/client entity or transaction, rather than just the legal/registered owner. However, the ownership and control percentage threshold remains at 25% or more under the BOT Act, whereas it remains 10% or more for the purposes of the AMLR.

Reporting nationalities

A notable change involves the reporting of each beneficial owners’ nationalities. Entities must now report one nationality for each beneficial owner, along with an indication of whether there are additional nationalities held. While the actual additional nationalities do not need to be disclosed, corporate services providers (CSPs) are required to obtain information for each.

Administrative fines

The BOT Regulations provide details regarding administrative fines that may be imposed for a breach of any of the provisions of the BOT Act or the regulations. The related BO Enforcement Manual (2021) details that the administrative fine shall be USD5,985 for a breach and the Registrar may, in addition to this initial fine, impose a further fine of USD1,200 per month for each month the breach continues. Total fines arising from a single breach are capped at USD29,926. When an administrative fine remains unpaid for 90 days, the Registrar may strike the reportable Legal Person of the register, resulting in the entity being dissolved.

Increased access and transparency

Beneficial ownership details of Cayman entities are stored in a centralised database which is the Beneficial Ownership Registry. While access to it remains limited, the number of government bodies with access has increased, including regulatory and enforcement agencies such as the Cayman Islands Monetary Authority (CIMA) and the Financial Reporting Authority. The United Kingdom has already entered into an agreement with the Cayman Islands government to share beneficial ownership information.

Single ‘pending’ status

Previously, CSPs could use either ‘enquiries pending’ or ‘confirmations pending’ to indicate the status of an entity’s Beneficial Ownership Register (BO Register). The BOT Regulations have consolidated these into a single ‘pending’ status. This change simplifies the reporting process, indicating either that the determination of registrable beneficial owners (RBOs) is ongoing or that particulars of identified beneficial owners are not yet confirmed.

Investment fund vehicles now in scope

All partnerships (including exempted limited partnerships and limited partnerships) are now within the scope of the BOT Act. The exemptions under the previous beneficial ownership regime have been removed, including the exemption for funds registered under the Mutual Funds Act (Revised) or the Private Funds Act (Revised) to report beneficial ownership. Instead, registered funds will be able to utilise an “alternative route to compliance” whereby they will be required to provide contact details of a licensed fund administrator or another Cayman-based contact person who can supply beneficial ownership information to the Registrar within 24 hours (or any longer period as specified in the request).

Cayman Islands investment funds registered under the Private Funds Act (Revised) or Mutual Funds Act (Revised) should therefore now consider whether they will either elect to apply the alternative route to compliance (as detailed above) or prefer to establish and maintain a BO Register under the BOT Act.

Marbury is able, subject to agreement, to provide a BO Principal Point of Contact for registered funds taking the “alternative route to compliance” through our Cayman Islands agent. Marbury’s Fund Solutions and Regulatory Advisory Services teams have established policies and procedures designed to assist these funds in responding to requests from the Registrar for beneficial ownership information.

To ensure good corporate governance, we will be reaching out to our fund services clients to ensure that they have established BO Registers in accordance with the new legislation.

Failure to comply

In addition to the new administrative fines that come into force with the BOT Act and BOT Regulations (as above), clients are reminded that offences under the original Beneficial Ownership regime remain in place. Potential offences such as the failure to establish or maintain a BO Register, or the failure of RBOs to supply relevant information or knowingly or recklessly making a statement that is false may face fines of USD5,985 to USD120,000. The court also has power to order a Legal Person to be struck off for persistent offending.

Next steps

For all affected Cayman entities, Marbury will be in touch to ensure steps can be taken and the relevant updates made to meet the 1 January 2025 deadline. Please be ready to conduct a thorough review of your current beneficial ownership structure and supporting documentation.

If you have any queries regarding the updates to the Beneficial Ownership regime detailed here or are unsure as to the general ongoing requirements for your Cayman company, please contact your usual Marbury relationship manager or get in touch via info@marburys.com.