Cayman Islands introduce regulations for virtual asset service providers

The notorious tax haven seems to be reforming its attitude towards MFA and terrorist financing before a review of the Caribbean Financial Action Task Force.

The Cayman Islands Government’s Ministry of Financial Services has announced that it has initiated a regulatory framework for virtual asset service providers (VASPs).

In a press release on October 31, the ministry stated that the change had strengthened the country’s „capacity to regulate and attract people and entities that deal with virtual assets as a business.

The first phase of implementation, already underway, focuses on compliance with and application of the Money Laundering Prevention (AML) and Counter-Terrorism Financing (CFT) standards.

The new framework incorporates the updated recommendations that the Financial Action Task Force (FATF) adopted in 2019.

As the Cointelegraph reported at the time, these recommendations included the controversial „travel rule,“ which requires VASPs to collect and share personal data on the originator and beneficiary of transactions.

Existing VASPs and newcomers to the market will need to register with the Cayman Islands Monetary Authority to demonstrate their compliance with global AML/CFT standards.

The Cayman Islands AML/CFT regime is currently under review by the FATF and the Caribbean Financial Action Task Force (FTAFC) following a recent Mutual Evaluation Report.

The VASP structure will be submitted for consideration before the FTAFC reclassification, scheduled for November. The conclusions of the FATF review are expected by the end of the first quarter of 2021.

The second phase of implementation of the structure will include „licensing requirements and prudent supervision“ and is expected to enter into force in June 2021.

Last month, the Cayman Islands were removed from the EU’s black list of tax havens and seem to be making great efforts to improve their image in financial circles.