In an exclusive interview, IFC Review speaks with the Cayman Islands Monetary Authority (CIMA) about recent regulatory developments and initiatives in the jurisdiction, considering the challenges and opportunities which lie ahead for Cayman’s financial services industry.
IFC: Looking back at CIMA's journey since 1997, what do you think have been its defining achievements?
As a primary supervisory authority for the financial services in the country, the Cayman Islands Monetary Authority (CIMA or ‘the Authority’) has played a pivotal role in establishing the Cayman Islands as one of the world’s most respected financial centres. Since its establishment, CIMA has significantly progressed as a sophisticated and mature supervisory authority by strengthening its regulatory framework, adopting the relevant international standards and supervisory best practices.
The Authority represents the Cayman Islands in various global forums, including the Financial Stability Board, the Caribbean Financial Action Task Force (CFATF), the Bank for International Settlements (BIS), the International Organisation of Securities Commissions (IOSCO), the International Association of Insurance Supervisors (IAIS), and the Group of International Financial Centre Supervisors (GIFCS). CIMA not only contributes to developing global standards for financial services regulation but also ensures that the jurisdiction adheres to these standards and best practices. To foster effective supervision and combat financial crime, CIMA has to date entered over 65 MMOUs/MOUs with international organisations and jurisdictions worldwide.
CIMA has implemented a range of supervisory tools and issued numerous policy measures to support and provide guidance to the industry stakeholders for complying with relevant legislative obligations. The Authority maintains close collaboration with the financial services industry and proactively employs various methods for industry engagement and consumer education.
In its commitment to operational efficiency, CIMA has embraced technological advancements to enhance regulatory processes. The adoption of advanced systems has allowed the Authority to demonstrate resilience during challenging times, such as the pandemic and natural disasters, ensuring uninterrupted services, and safeguarding consumer protection even under adverse circumstances.
Looking ahead, CIMA is committed to addressing emerging trends in the financial sector. Beyond regulating traditional financial services, the Authority has prioritised digital transformation, FinTech innovation, and sustainable finance initiatives, further cementing its position as a forward-thinking leader in the global financial industry.
CIMA’s 26 years of progress, and its standing as a premier financial services regulator, reflect its steadfast dedication to excellence, innovation, and resilience in navigating risks and challenges.
IFC: In March 2023, CIMA launched its first annual ‘Financial Stability Report’ which revealed strong and positive results despite the challenges of the pandemic and the impact of climate change. What were the key takeaways and how did they progress in 2024?
The Cayman Islands Monetary Authority released its inaugural Financial Stability Report (FSR) in March 2023, highlighting the resilience of the financial system despite challenges like the pandemic and climate change. The report emphasised the role of regulatory and supervisory enhancements, alongside discussions on household and real estate market exposures. CIMA also focused on ongoing climate-related initiatives and the interconnectedness within financial sectors, reinforcing its commitment to managing macroprudential risks. This report marked a shift towards greater transparency in the financial sector.
In 2024, CIMA’s second annual report continued to show strong, stable performance across the financial sector, with a projected GDP growth of 3.8 per cent. The banking sector, resilient to global challenges like rising interest rates and inflation, demonstrated stability with strong capital levels and liquidity buffers. The introduction of the Domestic Systemically Important Deposit-Taking Institutions policy further bolstered banking sector resilience by requiring additional capital reserves for critical institutions.
Cayman remains the second-largest jurisdiction for captive insurance globally, particularly in healthcare captives, with continued progress in refining climate risk assessments and stress testing. In the investment funds sector, which ranks second worldwide, CIMA has advanced transparency efforts, particularly by improving reporting on ESG strategies, in response to growing global demand for such disclosures.
The Cayman Islands’ removal from the FATF grey list and the EU blacklist in 2024 further bolstered its reputation as a transparent financial centre, following improvements in anti-money laundering (AML) and counter-financing of terrorism (CFT) practices. CIMA continues to refine its AML/CFT policies to ensure long-term resilience.
CIMA has also strengthened its cybersecurity regulations, requiring regulated entities to adhere to a comprehensive framework designed to mitigate cyber threats. This includes regular audits, risk assessments, and incident reporting. As FinTech solutions accelerate, CIMA is expanding its engagement with regulated entities to address vulnerabilities.
The real estate market in the Cayman Islands remains robust, with new housing projects and infrastructure developments supporting continued growth. CIMA monitors household debt levels and housing market trends to ensure sectoral stability and mitigate credit risks within the domestic banking sector.
In embracing digital innovation, CIMA continues to enhance its regulatory framework for virtual assets and blockchain technology, affirming its role as a progressive financial centre. The 2023-2024 FSR also acknowledged the growing influence of artificial intelligence (AI) in the financial sector, and the need for a regulatory framework to manage potential disruptions from emerging technologies.
The 2024 FSR provides a comprehensive assessment of the Cayman Islands financial landscape, highlighting resilience against global economic pressures and adaptability to emerging risks such as climate change and cybersecurity threats. The report emphasises sustained economic growth, a robust banking sector, proactive measures in insurance and investment funds, and advancements in digital finance and cybersecurity. CIMA's continued vigilance and strategic regulation position the Cayman Islands to remain a resilient and reputable global financial centre.
IFC: How essential is Cayman’s regulatory framework to the ongoing success of its financial services sector, and how does Cayman maintain a balance between regulatory compliance and the need to foster innovation for clients in today’s market?
CIMA has been central to the success and growth of the jurisdiction’s financial services sector. As a leading global financial hub for investment funds, private equity, banking, insurance, and trust services, the Cayman Islands benefits from a stable and well-structured regulatory framework that attracts clients and investors worldwide. CIMA’s robust regulatory regime ensures compliance with international standards while maintaining the flexibility to accommodate market participants of varying sizes and complexities, fostering confidence among investors and consumers.
CIMA has successfully maintained a balance between regulatory compliance and innovation by adopting policies that promote competitiveness in an ever-changing global market. The Cayman Islands has aligned its regulatory framework with international standards, such as the OECD’s Common Reporting Standard (CRS), to reinforce its commitment to tax transparency and maintain credibility on the global stage. While compliance is vital to global competitiveness, the jurisdiction also embraces innovation to address emerging trends such as FinTech, blockchain, and ESG investing. This dynamic approach allows the Cayman Islands to foster the development of new financial products and services without compromising high regulatory standards. Tailored solutions, such as those designed for cryptocurrency funds, blockchain ventures, and sustainable finance initiatives, showcase this balance, enabling service providers to innovate while ensuring compliance.
Collaboration between the Cayman Islands Government, CIMA, and the financial services industry ensures that regulations evolve in response to global trends and market demands. Regular engagement with stakeholders facilitates timely adjustments to the regulatory framework, allowing the jurisdiction to remain competitive. For instance, the introduction of the Virtual Asset (Service Providers) (VASPs) Act has provided clear guidance for digital asset service providers to comply with AML and CTF requirements, promoting sector growth while mitigating risks. Similarly, the 2020 Private Funds Act established a more streamlined framework for private equity and hedge funds, enhancing transparency while retaining flexibility. These regulatory developments exemplify how the Cayman Islands has adapted to industry needs by combining its robust regulatory regime with an innovative mindset.
The Cayman Islands’ regulatory framework ensures that financial services firms operate with robust internal controls, AML/CTF programs, and comprehensive reporting requirements, fostering trust and mitigating financial crime risks. At the same time, the framework supports innovation by offering structured pathways for emerging industries, such as impact investing and green finance, which are increasingly important in global markets.
Rather than viewing regulatory compliance as an obstacle, the Cayman Islands recognises it as a partner in maintaining the integrity of the financial system while enabling growth and innovation. This balance is achieved through continuous collaboration between the public and private sectors, ensuring that regulation supports innovation without compromising standards.
IFC: Has the Beneficial Ownership Transparency Act, 2023, enhanced the jurisdiction’s ability to protect itself from AML/CFT risks, and what other responses and policies has CIMA found most effective in addressing this global trend?
Prior to the enactment of the Beneficial Ownership Transparency Act, 2023 (BOTA 2023), the Cayman Islands already had a robust beneficial ownership regime in place. However, the revisions introduced by BOTA 2023 have added significant protections against AML/CFT risks. These enhancements include expanding the scope of entities subject to the regime, replacing exemptions with alternative compliance routes, broadening the definition of beneficial owners, and strengthening reporting requirements.
Importantly, BOTA 2023 aligns with the Financial Action Task Force’s (FATF) Recommendation 24 by ensuring that competent authorities, both locally and globally, have access to adequate, accurate, and up-to-date information on the beneficial owners of companies. This alignment has further strengthened the jurisdiction’s AML/CFT framework, enabling authorities to swiftly access critical information for identifying the beneficial owners of entities.
Beneficial ownership information is reported to and enforced by the Cayman Islands Registrar of Companies (RoC). CIMA coordinates with the RoC as necessary, ensuring alignment and cooperation to uphold the integrity and effectiveness of the beneficial ownership regime. Through its robust gatekeeping functions during the licensing and registration processes, CIMA plays a vital role in the regime’s effective implementation. This includes fitness and propriety assessments of beneficial owners, and ongoing supervisory measures such as onsite inspections. These practices ensure that the regime remains effective in addressing global AML/CFT trends and further reinforces the Cayman Islands’ commitment to maintaining a strong, transparent financial system.
IFC: In your view, do external regulatory pressures from organisations like the OECD, the EU and FATF present more challenges or increased opportunities for economic growth in the Cayman Islands?
External regulatory pressures from organisations like the OECD, EU, and FATF present both challenges and opportunities for the Cayman Islands, but if managed strategically, these pressures can drive long-term economic growth. The country’s ability to adapt to international regulatory standards has been crucial for robust regulation and in preserving its reputation as a leading global financial centre.
One of the key challenges is the increased compliance costs that come with aligning with global standards, particularly in areas like tax transparency, anti-money laundering (AML), and combatting the financing of terrorism (CFT). Financial institutions and firms operating in the Cayman Islands need to invest heavily in compliance infrastructure, which can be particularly burdensome for smaller firms. Adapting to frameworks such as the OECD’s CRS and the EU’s anti-tax avoidance measures adds legal and operational complexity, raising costs and potentially affecting profit margins.
Additionally, external pressures, such as the EU's past blacklisting of the Cayman Islands, can have a dampening effect on investor sentiment. Although the country has since strengthened its AML/CFT regime and regained its reputation, the risk of future black-listing or grey-listing could create regulatory uncertainty and potentially reduce capital inflows. Changing international tax norms, like those advocated by the OECD, could also limit the Cayman Islands' appeal to multinational corporations and investors seeking favourable tax treatment. The increasing scrutiny from organisations like FATF further adds to the regulatory burden, requiring continuous investment in due diligence, data reporting, and compliance systems, all of which increase operational costs and complexity for firms.
However, these external regulatory pressures also present significant opportunities. By aligning with global standards, the Cayman Islands enhances its reputation as a well-regulated and compliant jurisdiction, which is attractive to global investors and businesses. As international regulatory expectations become more stringent, being ahead of the curve in terms of compliance gives the Cayman Islands a competitive edge, particularly in sectors like private equity, hedge funds, and cryptocurrency funds, where investors prioritise regulatory certainty.
Furthermore, compliance with international standards can help attract more sophisticated capital, including institutional investors such as pension funds, sovereign wealth funds, and high-net-worth individuals, who require assurance that their investments are secure from regulatory or reputational risks. The Cayman Islands can also capitalise on growing sectors like FinTech and digital assets. The Virtual Asset (Service Providers) Act (VASPs), introduced in 2020, is an example of how the jurisdiction has responded to international pressures by offering regulatory certainty in the emerging cryptocurrency sector. This not only attracts blockchain developers and crypto entrepreneurs but also positions the Cayman Islands as a leader in the digital assets space.
Additionally, international collaboration with organisations like the OECD, FATF, and the EU, ensures that the Cayman Islands remains aligned with global regulatory trends, helping it stay compliant and attractive to foreign direct investment. This collaboration also opens doors to partnerships in emerging sectors like impact investing, ESG (Environmental, Social, and Governance) funds, and sustainable finance, which are experiencing growing demand.
While external regulatory pressures from organisations like the OECD, EU, and FATF present challenges, they also provide significant opportunities to strengthen the Cayman Islands’ financial services sector. By adapting to these pressures, the Cayman Islands can enhance its reputation, attract investment, and drive innovation, ensuring its continued success as a trusted and innovative financial hub.
IFC: What initiatives is CIMA pursuing to maintain and enhance regulation and transparency in Cayman’s thriving fund industry?
CIMA is continually enhancing its regulatory framework to uphold the integrity, transparency, and competitiveness of the investment fund industry. Recent legislative and regulatory updates, particularly the Rules and SOG on Corporate Governance and Internal Controls (effective 14 October 2023), have had a direct impact on the sector. These regulations emphasise the importance of tailored governance structures for regulated investment funds, specifically focusing on risk management, oversight, and senior management duties. This aligns with CIMA’s broader push for enhanced transparency, accountability, and corporate governance within the investment sector.
A key priority for CIMA is ensuring that investment funds comply with these enhanced governance requirements. With increasing global demand for accountability, the rules are designed to ensure that funds operate with robust oversight, sound risk management practices, and comprehensive reporting frameworks, particularly addressing the evolving complexity and risks within the sector.
Another focus area for CIMA has been the integration of ESG factors into the investment strategies of its registered investment funds. As global investor demand for ESG-aligned investments grows, CIMA has taken proactive steps to assess the financial sector’s challenges and opportunities related to climate risks. For instance, in Q1 2024, CIMA launched a survey of all regulated entities to gather insights on the financial sector’s exposure to climate change and environmental risks. The findings will inform future policies and help the jurisdiction adapt to global ESG trends.
Investment funds, particularly alternative investment funds, are increasingly exploring digital assets as part of their portfolios, driven by investor demand for diversification and potential returns. These funds must adhere to CIMA’s governance, AML/CTF regulations, and risk management standards, to ensure compliance in this rapidly evolving space.
In terms of supervision, recent initiatives from CIMA include the introduction of risk-based supervision for investment funds and outreach projects targeting non-compliant funds. Additionally, CIMA regularly engages with industry participants, such as legal professionals and service providers, through industry association meetings to gather input on emerging trends and regulatory needs. This consultative approach helps ensure that regulatory frameworks remain relevant and responsive to market changes. CIMA also hosts outreach events to raise awareness of common challenges, identify regulatory gaps, and share key observations. These events serve to educate industry participants on CIMA’s regulatory expectations for investment funds.
Through these ongoing initiatives, CIMA aims to maintain the Cayman Islands’ reputation as a leading investment fund jurisdiction while ensuring that the regulatory framework evolves to address emerging risks, meet global investor expectations, and adapt to the dynamic nature of the fund industry.
IFC: Since the enactment of the Virtual Asset (Service Providers) Act in October 2020, what progress has been made, and what initiatives are being undertaken to strengthen Cayman’s position as a leading digital jurisdiction?
The implementation of the Virtual Asset (Service Providers) Act (VASP Act) in October 2020 marked the first phase of the Cayman Islands' regulatory regime for the virtual asset sector. This phase primarily focused on overseeing Anti-Money Laundering (AML), Combatting the Financing of Terrorism (CFT), Counter-Proliferation Financing (CPT), and Targeted Financial Sanctions, as well as addressing cybersecurity and other critical risk areas. In 2021, a sectoral risk assessment of the Virtual Asset Service Providers (VASP) sector was conducted as part of the National Risk Assessment, and it is planned for continuous revision annually through AML surveys and information gathered from ongoing supervisory efforts.
To further strengthen and enhance the regulatory framework, CIMA has issued a range of regulatory measures. These include the Statement of Principles on Conduct of Virtual Asset Services (2021), the Regulatory Policy for the Registration and Licensing of VASPs (2022), and the extension of existing regulatory measures, such as the Rule and Statement of Guidance on Cybersecurity for Regulated Entities, to apply to VASPs. In the coming months, additional measures are set to be issued to provide enhanced guidance to Virtual Asset Custodians and Virtual Asset Trading Platforms.
Since the enactment of the VASP Act, CIMA has registered 25 VASPs, seven of which have been terminated through voluntary cancellations or lapsing of registrations due to non-payment of fees. These registered VASPs have been approved to provide a range of services, including trading platforms, custody services, issuance of virtual assets, exchange of virtual currency to fiat currency, and participation in financial services related to virtual assets.
In 2023, CIMA launched a dedicated VASP & FinTech Innovation Unit (the VASP Unit), which operates under the VASP Act. This unit is responsible for registration, supervision, and enforcement regarding VASP registrants and licensees. Additionally, it investigates entities suspected of providing virtual asset services without proper registration. The VASP Unit is supported by CIMA’s AML Division and the Onsite Inspection Unit, who conduct risk-based supervision, including onsite inspections and AML/CFT risk assessments. CIMA continues to expand its resources, investing in blockchain analytics tools and strengthening its AML/CFT risk assessment capabilities. As part of this effort, CIMA has implemented Annual AML Surveys and Travel Rule Requirements for all VASP registrants.
As a part of its ongoing monitoring, CIMA conducted onsite inspections of four VASPs in 2023 and one inspection conducted in 2024. Additionally, Desk-Based Reviews for 10 registrants are currently in progress. Further, as part of its perimeter policing efforts, CIMA has issued requirements and directions to 89 entities as of December 2023, compelling them to provide information, seek registration, or cease and desist their activities.
CIMA also regularly engages with industry participants through outreach sessions, such as webinars, sector-specific guidance notes, and public education campaigns. These initiatives foster innovation, ensure consumer protection, and promote financial stability within the jurisdiction’s FinTech and virtual asset sectors.
Looking ahead, CIMA continues to develop the VASP framework in collaboration with the Ministry of Financial Services (MFS) as they prepare to roll out the next phase of the VASP Act. This phase will include licensing for entities offering trading platforms and custodial services, as well as the implementation of prudential requirements for VASP entities.
IFC: The recent amendments to the Cayman Islands perpetuities legislation are said to herald a new era for settlors and trusts. How would you describe the anticipated impact on the sector?
The recent amendments to the Cayman Islands perpetuities legislation represent a significant development for the jurisdiction, particularly for settlors and trusts. This is a welcome change that aligns the Cayman Islands with other leading trust jurisdictions, further enhancing its position as a top choice for trust and estate planning.
The Amendment Act will revise the Perpetuities Act (1999 Revision) to allow settlors of Cayman Islands trusts established on or after July 2024 to disapply the rule against perpetuities, effectively enabling the creation of perpetual trusts. This change offers greater flexibility and long-term planning opportunities for clients, allowing trusts to continue indefinitely without being subject to the traditional rule that limits the duration of trusts.
This amendment is expected to have a positive impact on the sector by making the Cayman Islands even more attractive to international clients seeking to establish long-lasting and flexible trusts. It will open new possibilities for wealth preservation, asset protection, and intergenerational planning, while further solidifying the jurisdiction’s reputation as a leading global trust centre.
IFC: What are the challenges and opportunities for Cayman’s financial services industry in 2025, and what areas will CIMA prioritise moving forward?
As the Cayman Islands looks towards 2025, the financial services industry faces several challenges, including the rapid pace of technological advancements, shifting global regulations, cybersecurity risks, consumer protection concerns, and an increasing focus on sustainability. Additionally, emerging risks and trends in financial crime, particularly those involving cryptocurrency in recent years, continue to present significant challenges and remain a key focus area for the Cayman Islands.
At CIMA, we view challenges as opportunities for improvement, and this approach is reflected in our Strategic Plan, which outlines key priorities for the 2024-2026 period. CIMA’s current strategic objectives focus on six core areas: enhancing technological capabilities, strengthening efforts to combat financial crime, establishing proactive and effective regulation, being recognised as an employer of choice, maintaining the integrity of Cayman’s currency, and expanding public outreach and education. These priorities will ensure that the Cayman Islands remains competitive, well-regulated, and well-positioned for the future.
CIMA is actively addressing these challenges and pursuing these opportunities to enhance its regulatory framework and supervisory processes in collaboration with relevant stakeholders. CIMA is confident that by embracing innovation, strengthening regulatory frameworks, and prioritising sustainability, the Cayman Islands can continue to lead as a global financial centre.
Cayman Islands Monetary Authority (CIMA)
Cayman Islands Monetary Authority (CIMA)