Worldwide: Cayman Government Task Force Reports On Russia Sanctions

A Cayman Islands government task force established on 16 March 2022, less than a month after Russia's invasion of Ukraine, has reported that in the past 18 months it reviewed and processed 1,226 compliance reporting forms under Cayman's Russia Sanctions regime.

As a result, two Cayman-flagged vessels have been deregistered at the direction of the Governor of the Cayman Islands and another 40 vessels have been deregistered as they were unable to meet the requirements of the Merchant Shipping Act due to sanctions restrictions.

The Cayman Islands Civil Aviation Authority, meanwhile, deregistered six helicopters and six fixed-wing aircraft.

In terms of financial assets, US$8.32 billion and EUR230.1 million have been frozen.

As of September 2023, Cayman service providers filed 199 suspicious activity reports in response to Russia sanctions.

The United Kingdom has extended several amendments of its Russia Sanctions regulations to the Cayman Islands, where the sanctions measures apply in the same way they do in the UK.

Financial services provider obligations

Under the Russia sanctions regime, local financial services providers and financial institutions must check whether they maintain accounts or hold funds or any other assets for individuals named by the Office of Financial Sanctions Implementation of the UK's HM Treasury.

In such cases, they must freeze the accounts or assets and report them to the Financial Reporting Authority, which may pass the information on to regulatory authorities and law enforcement.

Financial institutions are prohibited from dealing with the funds or making them available unless licensed by the governor.

The governor has issued four such general licences, including one licence that has been extended. A total of 29 licence applications have been filed – 22 in 2022 and seven in 2023. The grant of any licence by a British Overseas Territory requires also the consent of the UK Secretary of State.

Task Force 'Operation Hector'

The Cayman Islands government established a task force of various government entities, named Operation Hektor, to coordinate the implementation of the sanctions imposed on Russia in response to its war in Ukraine.

The task force is chaired by the director of the Financial Reporting Authority, RJ Berry. The Cabinet Office, as task force coordinator, facilitates and coordinates inter-agency cooperation, policy, and communications.

The task force further includes representatives from the Governor's Office, the Ministry of Financial Services and Commerce, the Cayman Islands Monetary Authority, the Civil Aviation Authority, the Maritime Authority, General Registry, Land Registry, Customs and Border Control and the Cayman Islands Bureau of Financial Investigations.

Since the Russian invasion, the UK has made 20 amendments to The Russia (Sanctions) (EU Exit) Regulations 2019, and six amendments to The Russia (Sanctions) (Overseas Territories) Order 2020.

In May 2023, task force members met with representatives from the Foreign, Commonwealth and Development Office (FCDO) Sanctions Directorate during their visit to the Cayman Islands. The Task Force shared its local experience of implementing sanctions work, including some of the challenges that have been experienced over the past year.

The Attorney General, Samuel Bulgin, said in a government press release that despite the identified challenges, Operation Hektor had worked very well for the Cayman Islands.

He said, "Both the Foreign, Commonwealth & Development Office and the Office of Financial Sanctions Implementation have provided positive feedback on its work, and it has been mentioned that this joint task force model is being considered by other British Overseas Territories as they see the benefit of such a framework for sanctions work."

Cayman Islands Governor Jane Owen noted that the UK Parliament recently marked the Fifth Anniversary of the Sanctions and Anti-Money Laundering Act (SAMLA), the first piece of post-Brexit legislation.

"This Act has helped shape UK foreign policy and provided a platform for the UK, along with our international partners, to implement the most severe package of sanctions ever targeted against a major economy," Governor Owen said. "I am extremely grateful for all the work being undertaken across both the Cayman Islands Government and the private sector to enforce the Russia Sanctions regime and counter the illegal Russian invasion of Ukraine."

As a result of SAMLA, more than 4,000 individuals and entities have been designated; £18billion worth of Russian assets have been frozen; and 60% of Vladimir Putin's 'war chest' of foreign reserves worth £275 billion have been put beyond reach.

Premier Wayne Panton said: "I am pleased that the Operation Hektor joint task force has been a successful framework in which centralised discussions, decisions and communications can take place on arising Russia sanctions policy matters. The Cayman Islands will continue to be steadfast and proactively work towards ensuring good governance and supporting international peacekeeping."

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