Banking and finance

The Cayman Islands Government has passed a number of amendment laws to strengthen Cayman's anti-money laundering and counter-financing of terrorism regime. The laws, published on 8 August 2019, are intended to help address certain recommended actions in Cayman's legislative framework identified by the Caribbean Financial Action Task Force in its evaluation report published in March 2019. The Companies (Amendment) Law, 2019, the Limited Liability Companies (Amendment) Law, 2019 and the Limited Liability Partnerships Law (Amendment) Law, 2019 each amend their respective principal laws to enact changes to the filing, maintenance and availability of information in respect of such Cayman entities. Similar amendments apply for each type of entity but the following is a summary of the amendments as they relate to Cayman companies: (a) commencing 7 November 2019 (for companies incorporated after 8 August 2019) and 7 February 2020 (for companies incorporated on or prior to 8 August 2019), voting rights in respect of each shareholder must be recorded in the register of members of the company; (b) with immediate effect, the period for filing changes to the register of directors of the company with the Registrar has been reduced from 60 days to 30 days; (c) the penalties for failure to establish or maintain a beneficial ownership register have been increased to CI $25,000 (US $31,000) for a first offence, CI $100,000 (US $122,000) for a second offence and ability for strike off by direction of the court for a third offence. Failure to comply with any notice or to provide information under the beneficial ownership legislation will, on conviction, incur a fine of CI $25,000 (US $31,000) for a first offence and CIS$50,000/ US $61,000 (or two years' imprisonment) for a second or subsequent offence; and (d) the Cayman Islands Registrar of Companies (Registrar) shall be obliged to provide information to other regulatory bodies such as the Anti-Corruption Commission, Cayman Islands Monetary Authority, Financial Crimes Unit of the Royal Cayman Islands Police Service, Financial Reporting Authority, Tax Information Authority and any other competent authority (Regulatory Authorities) upon request from such regulatory body. Similar changes to Cayman trusts have been introduced by the Trusts (Amendment) (No. 2) Law, 2019 that requires trustees, wherever based, of Cayman Islands law governed trusts to keep and maintain accurate and up to date records in relation to settlors, contributories, beneficiaries, protectors, enforcers, service providers and controlling persons as well as accounting records. It also requires the Registrar of Trusts, trustees, and other persons who exercise ultimate effective control of trusts, to share information on registered trusts with Regulatory Authorities and provides for sanctions to be imposed for failure to provide such Regulatory Authorities with required information in a similar fashion to the Registrar, as set out above in respect of companies. With effect from 1 October 2019, an additional amendment of significance contained within the Companies (Amendment) Law, 2019 will require the names of the current directors and alternate directors of all Cayman companies to be publicly available from the Registrar on the payment of a fee of CI $50 (US $61). The information available is limited to the names of the current directors and alternates and does not include any other personal details such as address, date of birth or nationality. A search may be conducted in relation to a specific company only and may only be made in person at the offices of the Registrar. The same requirement has been made in respect of managers of limited liability companies under the Limited Liability Companies (Amendment) Law, 2019. In terms of required actions - clients are advised to: contact their registered office provider to ensure that the register of shareholders will be updated with the relevant shareholder voting information by the required deadline; in the case of investment funds, contact their fund administrators to ensure that the register of shareholders of their respective funds will be updated with the relevant shareholder voting information by the required deadline; and take the opportunity to verify the information contained in the register of directors or, in the case of limited liability companies, managers held at the registered office filed with the Registrar. Please contact your usual Ogier attorney or any of the contacts listed here for further information or advice in relation to any of the above changes.

The Cayman Islands Data Protection Law, 2017 (DP Law) is currently scheduled to come into effect on 30 September 2019.  Once commenced, it will enact a framework of rights and duties to regulate the processing of individuals' personal data broadly based on the same internationally recognised privacy principles that form the basis for other data protection laws globally.  The DP Law will regulate the processing of all personal data in the Cayman Islands and will affect any entity established in the Cayman Islands, including investment funds, that processes personal data regardless of whether such processing takes place within the Cayman Islands and regardless of whether the personal data relates to Cayman individuals.  For our full briefing see Cayman Islands Data Protection Law: An Ogier Client Guide. What does this mean for Cayman funds? Under the DP Law, any entity established in the Cayman Islands that handles any individual's personal information will have certain obligations with respect to that information and must ensure that such individual is formally apprised of by whom, and for what purpose, any of their personal data is being used. A Cayman fund will be regarded as a data controller under the DP Law as a 'person who, alone or jointly with others determines the purposes, conditions and manner in which any personal data are, or are to be, processed'. As such, the fund will be responsible for complying with the requirements of the DP Law and the data protection principles in respect of personal data processed by the fund or on behalf of the fund by any third party processors such as its administrator and other service providers (each a data processor). Under the DP Law, data controllers must act in accordance with eight data protection principles: personal data held by the fund must be processed fairly and lawfully; personal data must be used for a legitimate purpose that has been notified to the data subject in advance; personal data holdings should be adequate and relevant and not be excessive in relation to the purposes for which they are collected; personal data held by the fund should be accurate and up to date; personal data should not be kept for longer than necessary and should be securely deleted once those purposes have been fulfilled; personal data should be processed in accordance with the rights of individuals; the fund should apply (and ensure that its data processors apply) appropriate technical and organisational measures in relation to the personal data; and personal data shall not be transferred outside of the Cayman Islands other than to a territory with an adequate level of data protection or in accordance with the DP Law. Breaches under the DP Law could result in fines of CI $100,000 (US $122,000) and certain offences are punishable by imprisonment. Other monetary penalties of up to Cl $250,000 (US $305,000) are also possible in certain circumstances. What action does a Cayman fund need to take to ensure compliance? Cayman funds should act now to ensure that they comply with the DP Law by the expected commencement date of 30 September 2019. Recommended actions required include (without limitation): prepare and approve a new privacy notice, or amend the form of the current privacy notice, and circulate the same to existing investors; revise the form of subscription documents for any investors subscribing into the fund after the commencement of the DP Law on 30 September 2019; ensure that contracts with service providers that process personal data on behalf of the fund comply with the DP Law, and negotiate and agree on amendments if necessary; and ensure all amendments to fund documents are appropriately approved and authorised. Should you have any questions, we would be happy to discuss the implications of the DP Law for your fund and to assist with your fund's compliance. Please contact your usual Ogier attorney or a member of our team listed here.

EU finance ministers have formally approved Jersey's economic substance legislation by removing the jurisdiction from the "grey list" on 12 March 2019 and the Privy Council granted formal approval to the Taxation (Companies - Economic Substance) (Jersey) Law 2019 (the Law) on 13 March 2019. The Law takes effect from 1 January 2019. The Law – similar to laws passed in other offshore jurisdictions in response to findings of the EU Code of Conduct Group - requires relevant companies to demonstrate economic substance in the jurisdictions in which they are tax resident. Following approval of the Law, further Guidance Notes about the practical implications of the Law are expected shortly. Our view, in anticipation of those Guidance Notes, is that: clients and advisers should review outsourcing arrangements in respect of Jersey tax-resident companies that fall within the scope of the Law and consider whether the third-party service provider agreements in place meet the tests set out, particularly in relation to provision of office space and appropriate access to sufficiently senior employees; the Law defines "finance and leasing business" broadly to mean the provison of credit facilities of any kind for consideration, so while interest free lending arrangements are not likely to be caught, consideration should be given to whether any intra-group financing arrangements are within the scope of the Law; the Law also captures "holding company business", which captures the business of primarily acquiring and holding a controlling interest in shares or equitable interests; and we anticipate further detailed guidance on the precise definition of activities to fall within the scope of the Law, and the definition of adequacy in respect of employees, expenditure and premises under the tests. The Law includes three key tests. Relevant companies must be directed and managed in Jersey, which requires: meetings of the board of directors (all of whom must have the necessary knowledge and expertise to discharge their duties as a board) in Jersey at adequate frequencies, given the level of decision making required; a quorum of the Board of Directors to be physically present in Jersey at these meetings; minutes recording the strategic decisions of the company made at these meetings; and retention of all company records and minutes in Jersey. Relevant companies must also demonstrate adequate activity in Jersey: have an adequate number of employees; demonstrate adequate expenditure in Jersey; and have access to adequate "physical assets", or premises, in Jersey. They must also conduct Core Income Generating Activities, or CIGAs, in Jersey, which in the case of "finance and leasing business" includes: (i)agreeing funding terms, (ii)identifying and acquiring assets to be leased (in the case of leasing), (iii)setting the terms and duration of any financing or leasing, (iv)monitoring and revising any agreements, (v)managing any risks In relation to "holding company business" the CIGAs are broadly defined as all activities related to that business. Consideration will need to be given to ensuring sufficient CIGAs are carried on in Jersey in order to demonstrate compliance with the requirements of the Law. If you would like to discuss any aspects of the Law, or whether your companies or clients may be affected, please speak to your usual Ogier contact, or contact a member of our Economic Substance team.