Targeted Financial Sanctions
A number of international financial sanctions are applied against countries, regimes or persons designated to be in violation of international laws. They are imposed with the intent of 1) changing the conduct of listed countries, regimes or persons; 2) imposing punitive measures when international peace and security are threatened and diplomatic efforts have failed; 3) signaling disapproval and demonstrating international unity for e.g. a territory-controlling terrorist group that does not require access to the international financial system; 4) protect the value of assets that have been misappropriated from a country until these assets can be returned and/or 5) deterring, preventing or suppressing terrorist acts or nuclear proliferation.
The United Nations (UN) imposes financial sanctions through resolutions passed by the UN Security Council (“UNSCRs”). The European Union (EU) implements all financial sanctions imposed by the UN through EU regulations. The EU imposes its own financial sanctions which are also implemented through regulations. The UK can impose its own financial sanctions and restrictions under its domestic legislation. In certain circumstances, the Cayman Islands can also impose its own financial sanctions and restrictions under the Terrorism Law (2018 Revision) (TL) and the Proliferation Financing (Prohibition) Law (2017 Revision) (PFPL).
From time-to-time, the UK Government passes Orders (“Orders”) in Council extending UN or EU sanctions to its Overseas Territories. When extended to Overseas Territories, these Orders have the force of law in the Cayman Islands, as a British Overseas territory, and any breach of an obligation will constitute an offence for which fines and/or criminal convictions may result under the Terrorism Law (2018 Revision) and the Proliferation Financing (Prohibition) Law (2017 Revision).
The United Nations has passed two resolutions relating to anti-proliferation, one related to The Democratic People’s Republic of Korea (UNSCR 1718 (2006)) and the other related to Iran (UNSCR 2231 (2015)). In relation to proliferation, the current orders that give effect to the United Nations Security Council Resolutions are The Democratic People’s Republic of Korea (Sanctions) (Overseas Territories) Order 2012 and The Iran (Sanctions) (Overseas Territories) Order 2016 (including the amendment to the order) respectively.
In addition, there is currently one United Nations Security Council Resolution, UNSCR 2252 (2015) (replacing UNSCR 1267 (1999) and UNSCR1988 (2011))relating to terrorist financing: In respect of terrorist financing, the current Orders that give effect to UNSCR 2252 (2015) (and the previous resolutions it replaced) are The Isil (Da’esh) and Al-Qaida (Sanctions) (Overseas Territories) Order 2016 and the Afghanistan (United Nations Measures) (Overseas Territories) Order 2012.
The Anti-Money Laundering Regulations require Regulated Firms to have systems and controls to keep their screening lists up to date, to conduct ongoing monitoring to detect sanctions violations and to conduct staff training on TFS.
It is also important to note that sanctions orders apply to all Caymanian individuals and all companies established under Cayman Islands law or operating in the Cayman Islands.
The Financial Reporting Authority has issued Guidance on Targeted Financial Sanctions for the public that FSPs might find useful as it contains information on sanctions reporting obligations under the Orders Terrorism Law and the Proliferation Financing (Prohibition) Law
Obtaining a licence under Sanctions Orders.
In certain cases, persons can apply under the relevant order for a license allowing for the desired activity to be conducted that would otherwise be prohibited under the order. The respective order should be consulted to determine if a licence is available. An application for a licence is to be made in writing to the Financial Reporting Authority. A copy of the licence application form can be found in the Guidance on Targeted Financial Sanctions issued by the Financial Reporting Authority.
Pursuant to Regulation 5 of the Cayman Islands Anti-Money Laundering Regulations (as amended), firms of attorneys-at-law that are conducting relevant financial business are required to implement procedures to ensure compliance with targeted financial sanctions obligations applicable in the Cayman Islands.
In October 2019, The FRA launched the ‘automatic emailer’ enabling subscribers to receive timely email notifications of the financial sanction targets that are implemented in the Cayman Islands. We strongly advise all attorneys to subscribe to receive sanctions notices either directly on the FRA website, or by emailing the FRA at FinancialSanctions@gov.ky and using the subject heading “Subscribe”. Please indicate in the body of your email that you are an attorney/representing a firm of attorneys.