FATF Removes Cayman Islands and Panama From Increased AML Monitoring List

In the last plenary meeting of the Financial Action Task Force (FATF) on October 27th, the Cayman Islands and Panama were removed from the authority’s AML monitoring list.

FATF investigated both countries and visited on-site to approve their financial law enforcement agencies. The international regulatory authority claimed that the Cayman Islands and Panama adequately comply with rigid international standards to combat money laundering and terrorist financing. FATF added Cayman Island to the “gray-list” in February 2021. According to FATF Cayman Islands, the AML screening has loopholes in three essential areas. The first was that effective and strict sanctions should be applied against all non-compliant financial institutions. Secondly, they don’t impose penalties on businesses that don’t have up-to-date Ultimate Beneficial Ownership (UBOs) and do not file accurate data. The last one FATF noticed its jurisdictions do not take rigid steps to comply with all types of money laundering risk assessment profiles, and such oversight causes several financial crimes.  

Since then, the Cayman Islands improved in various AML fields and has taken serious steps to comply with international standards. FATF delegates visit and appreciate the significant improvements in its system and controls to secure the integrity of the global ecosystem. FATF stated, “delisting was justified by ‘enforcement actions [which] now include administrative penalties for proven breaches of required elements of AML monitoring, as well as the imposition of sanctions to assure filing of accurate, adequate and up to date beneficial ownership information by obliged Cayman Islands entities.” Implementing hefty penalties on non-compliance financial institutions from the jurisdiction is also a key reason behind FATF’s decision. 

UK law firm, Maples, stressed that “with this significant milestone achieved, there is an expectation that the removal from the FATF’s Gray List will soon lead to the Cayman Islands’ delisting from the EU’s AML/CFT list.”  Cayman’s Ministry of Financial Services is continuously collaborating with the EU’s officials and enforcing that these latest implementations in the AML systems can also be worthwhile for the EU’s requirement. 

Panama’s Government also has made significant progress in the AML compliance process. In June 2019, FATF added them to the “gray-list.” FATF disclosed various deficiencies in Panama’s security control system. Primary loopholes at that time were the collection of data on beneficial ownership information, inadequate systems to monitor shell companies, failure to prevent company owners from misusing financial organisations services, and law enforcement agencies of the country not being able to conduct a risk assessment and collaborate with international authorities. The delegates appreciate the latest strict obligations from the Panamanian government and admire the positive attitude to protect the country from bad actors. 

In order to improve the resources available to law enforcement, asset recovery organisations, and criminal justice systems, the FATF summit also decided to adjust its asset recovery requirements. This would allow these organisations to freeze, seize, and confiscate illegal property more successfully, both locally and through collaborative efforts abroad. FATF will publish new regulations in November 2023, and all the member states should comply adequately with these latest obligations. 

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