THE REGULATORY 15/15
Podcast
December 2024
Content
• CIMA FAQ – Corporate Governance – Operator Meetings
• CIMA Thematic Review Report – Corporate Governance
• CIMA Warning Notice on Phishing Emails
• Virtual (Service Providers)(Amendment) Bill, 2024
• SAR Consent Regime
• Beneficial Ownership Reminder
• Director deregistration Reminder
Introduction
Introduction to the 15/15
• A 15-minute summary of the latest developments in the regulatory laws of the Cayman Islands released on the 15th day of every month
• A copy of the previous 15/15 released on 15 November can be accessed on our website: Maples 15/15
• Comments and suggestions to format of the 15/15 are always welcome –please email speakers directly
CIMA FAQ – Corporate Governance –
Operator
Meetings
CIMA FAQ – Corporate Governance – Meetings
• On 10 December 2024, the Cayman Islands Monetary Authority (CIMA) published a new FAQ which, in effect, provides an extension of up to 6 months for the holding of an annual operator meeting for a registered investment fund
• The FAQ contemplates:
o the number of operator meetings reflected in an FAR form is not restricted to meetings held exclusively during the relevant financial reporting period but may also capture meetings held to address matters arising from the relevant reporting period at any time after the fund's financial year end up until the date on which that fund's FAR form is completed
o this could include meetings held after the end of the applicable financial year end to review and approve an investment fund's audited financial statements
• The FAQ does not permit double counting
• This may assist clients with scheduling issues and when auditors request operator meeting minutes when preparing FY2024 audited financial statements
CIMA Thematic Review Report
Corporate Governance
CIMA Thematic Review Report
Corporate Governance
• In November 2024, CIMA issued its Thematic Corporate Governance Review Report following a review conducted this year to assess compliance with the Rule on Corporate Governance
• The review evaluated 19 selected licensees across the Banking, Fiduciary, Insurance, Investments and Securities sectors
• Highlighted both commendable practices and areas requiring improvement
• Only 1% of findings arose from a failure to implement a corporate governance framework
• As with all Rules and Statements of Guidance, CIMA will be assessing compliance with the Rule on Corporate Governance during onsite inspections and during the investigation of any complaint by CIMA or when otherwise brought to the attention of CIMA
Thematic Review Report (Cont'd)
• Best practices identified:
o Appropriate allocation of oversight and management responsibilities thoroughly documented within corporate governance (CG) frameworks
o Established policies and practices for declaring actual or potential conflicts of interest, written annual declarations and adequate procedures to manage actual or perceived conflicts of interest
o Ongoing declarations of conflicts of interest both annually and in meetings
o Well-established governance, oversight and reporting structures implemented by the Boards of Directors
Thematic Review Report (Cont'd)
o Governing Bodies evaluated the work performed by Senior Management through review of Management Reports presented to the Board on a regular basis
o All members of the Board of Directors received approval from CIMA and the Register of Directors and Board resolutions were maintained in compliance with regulatory requirements
o Board Charters and Corporate Governance Policies outlined the detailed responsibilities of individual Directors and the responsibilities and functioning of the Board
Thematic Review Report (Cont'd)
• Areas for improvement included:
o CG frameworks did not evidence measures in place to ensure that the relevant regulator(s) is notified, within 10 days of any substantive issues which could materially affect the Regulated Entity
o Inadequate policies and mechanisms in place to ensure that NonExecutive Directors devote sufficient time to the role needed for effective and efficient execution of associated responsibilities
o Failure to evidence the review and approval of key policies and procedures
Thematic Review Report (Cont'd)
o Failure to identify potential successors for Board Members and Senior Management
o Objectives and strategies not readily documented and communicated to Senior Management and staff
o Board of Directors held meetings informally and did not consistently prepare detailed minutes of all Board meetings with all decisions, discussions and points for further actions being documented
o Conflicts of interest and code of conduct policies did not address key conflict of interest management practices
CIMA Warning Notices
Phishing Emails
CIMA Warning Notices –
Phishing Emails
• On 19 November 2024, CIMA published a notice warning of a phishing campaign involving fraudulent emails falsely claiming to originate from CIMA
• This follows a similar warning notice CIMA had issued on 30 October 2024
• The latest scheme extends to activities such as offering fund recovery, cryptocurrency conversion services and distributing forged documentation to deceive recipients
• The fraudulent correspondence purportedly originates from Mr. Christopher Buock, using the email address AMLSurveys@cima.ky
• AMLSurveys@cima.ky is a valid email address used by CIMA but it is not being used legitimately in this instance
• There has been no evidence of unauthorised access or compromise of CIMA's network but individuals are encouraged to remain vigilant and to promptly report any suspicious emails to ContactPublicRelations@cima.ky
Virtual Asset (Service Providers) (Amendment)
Bill, 2024
VASP (Amendment) Bill, 2024
• On 15 November 2024, the CIG published the Virtual Asset (Service Providers)(Amendment) Bill, 2024
• This bill provides the regulatory basis for phase 2 of the Cayman Islands' VASP regime which relates to the introduction of a licencing regime for trading platforms and virtual asset custodians
• Key amendments to note:
o Adds definitions of "convertible virtual asset", "financial services business", "owner" or "operator" (rather than just "operator") and "originator"
o Shareholders, directors and senior officers must be 'fit and proper persons’
o CIMA may impose conditions on applicants for registration / licensing
o AML compliance: collect / retain detailed records of originators and beneficiaries of virtual asset transfers
o Enhanced requirements for virtual asset custody services (safeguards)
VASP (Amendment) Bill, 2024
(Cont'd)
o Revised licensing provisions under section 15 (repeal of Part 4)
o Enhanced supervisory and enforcement powers for CIMA
• CIMA can require production of audited financial statements and access to books and records in performance of its functions
• VASPs must seek CIMA's prior approval of changes to their business plan and for virtual asset services not included in their approved application / business plan
• VASPs must notify CIMA of certain material changes within 30 days
• CIMA can require licensing under other regulatory Acts as well
• CIMA can grant / revoke waivers and revoke licences / cancel registrations
SAR Consent Regime
SAR Consent Regime
• The Proceeds of Crime (Amendment) Act, 2023 introduced certain changes to sections 133-135 of the Act which effectively require the Financial Reporting Authority (FRA) to consent to any proposed actions following the filing of a SAR (DAML / Consent Regime)
• The DAML / Consent Regime requirements were intended to commence on 2 January 2025
• We now understand that commencement will be delayed to later in 2025
• There will be full industry consultation regarding regulations that will specify how the DAML / Consent Regime will operate
• We further understand there will be a deemed consent provision if no response is received from the FRA within a specified time period
• The FRA will issue industry guidance and conduct outreach
Beneficial Ownership Reminder
Beneficial Ownership Reminder
• Significant changes to the Beneficial Ownership Regime in 2024
• The Beneficial Ownership Transparency Act and Regulations came into force on 31 July 2024
• Enforcement was delayed until 1 January 2025
• What do I need to do before 1 January 2025?
o Identify whether your entities are in scope of the regime (all but trusts and foreign entities will be)
o Determine whether you can avail of an alternative route to compliance and, where required, appoint an Authorised Contact
o If you are required to establish and maintain a beneficial ownership register, collect all required particulars and report those to your CSP
• Maples would be pleased to assist
Director Deregistration
Reminder
Director Deregistration Reminder
• When a regulated is terminating, its directors can resign on the appointment of a liquidator
• Directors who are coming off all 'covered entities' are reminded to file their deregistration application under the Directors Registration and Licensing Act ( As Revised) prior to 31 December 2024, wherever possible, to avoid incurring 2025 annual fees
• To surrender registration (deregister), log on to CIMA's Director Portal
• Resign from the entity by selecting the appropriate reason and uploading supporting documentation
• Pay the surrender / deregistration fee of CI$600 / US$731.70
• CIMA will only deregister you to the extent you do not remain as a director of any other 'covered entity'
• CIMA reserves the right to request additional information as necessary
This presentation was presented on, and is only accurate to11 December 2024. The information within this presentation is provided for general guidance only, is not intended to be comprehensive and does not constitute legal advice or give rise to an attorney / client relationship.
Specialist legal advice should be taken in relation to specific circumstances. If you require legal advice, please reach out to your usual Maples and Calder contact.
Published by Maples and Calder (Cayman) LLP.
December 2024
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