In this month's Cayman Islands Regulatory 15/15 episode, Chris Capewell, Adam Huckle and Daniel Moore discuss recent updates on Tokenised Funds, Beneficial Ownership Guidance, AML/CFT, CIMA Enforcement and Supervisory Matters and FATF Reports on Virtual Assets.

To read the 2026 Cayman Islands Regulatory Calendar, visit https://maples.com/regulatory-round-up/2026-cayman-islands-regulatory-calendar.

SPEAKERS:

Chris Capewell, Partner | +1 345 814 5666 | chris.capewell@maples.com | View bio

Adam Huckle, Partner | +1 345 525 5377 | adam.huckle@maples.com | View bio

Daniel Moore, Of Counsel | +1 345 936 5429 | daniel.moore@maples.com | View bio

Visit our Regulatory Round-Up Blog for the latest developments and insights in the regulatory landscape

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It's not too bad.

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1515 podcast.

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I'm Chris Capewell and I'm the Head

of the Regulatory Team here at Maples.

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And joining me today,

I have my fellow partner, Adam Huckle.

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Hey, Adam, how're you doing?

Good stuff. Thanks.

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Good, good.

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And we also have our special guest flown

in, especially all the way from Asia.

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Daniel Moore,

who's of counsel in our Hong Kong office.

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And he's here today

in person to do the podcast.

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Hey, Dan. There you go. Thanks, Chris.

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Nice to be here.

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Good.

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Don't sound as enthusiastic as Adam,

but maybe you'll warm up.

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The march edition

today, we're going to cover

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all the latest developments

since our last episode in February.

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There's quite a bit, but then we need to

get into too much detail on any of them.

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We will be covering tokenized funds.

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There's some updates on

beneficial ownership guidance.

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There's AML and CFT updates.

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There's an update to the enforcement

and supervisory matters to CIMA.

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We've got a couple of FATAF reports

on virtual assets that I think, Dan,

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you're going to talk to.

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So so we'll crack on.

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As always, if you do want to subscribe,

please go to Apple Podcasts or Spotify.

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So Dan to you first

tokenized fund amendments.

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Thanks, Chris.

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So yeah, we've had some big news

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for the industry in that three

tokenized funds amendment bills

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were passed as anticipated by Parliament

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And the framework is actually three

different pieces of legislation

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that are all interlinked.

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So we've got amendments

to the Mutual Funds Act, the Private Funds

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Act, and also to the virtual asset

service providers or VASP act.

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And it's quite big news

because together, these bills put together

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a framework for tokenized investment

fund structures in Cayman.

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And as some listeners will be aware,

tokenization refers

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to the digital representation

of an investors interest in the fund

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using blockchain or similar technology,

while at the same time the underlying

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legal ownership and the investor

rights remain as normal. So.

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So these structures offer potential

efficiencies in areas like record keeping,

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transfer controls, settlement processes,

onboarding and so on.

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And for those reasons,

they've been increasing in popularity

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for for a number of years.

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But the challenge

was that the absence of express statutory

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provisions gave rise to some legal

uncertainty, particularly around

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whether the issuance of digital tokens

by funds could fall within the scope

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of the VASP act,

and some actors were concerned

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that this could lead to dual regulation

under VASP and mutual

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or private funds, with the associated

costs and uncertainty that come with that.

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So, following consultation

with industry stakeholders,

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the Cayman Islands Monetary Authority,

the Ministry of Financial Services

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and Commerce all concluded that

tokenized funds are most appropriately

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regulated within Caymans

existing funds framework. The.

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Probably the most important amendment

is that the VASP Amendment Act clarifies

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that the issuance of digital tokens

by a regulated fund

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will not constitute a virtual asset

issuance under the VASP act.

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So that was the

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I think, the change that most industry

participants were looking for clarity on.

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In addition to that, the mutual funds

and private fund bills introduce

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a few new statutory provisions

for tokenized funds,

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and that includes specific legal

definitions of digital equity

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tokens, digital investment tokens,

some enhanced record keeping obligations,

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some clarifications around transferability

and how that would work,

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and also disclosure of technology

specific risks in fund documentation.

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So it's quite a big change.

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We'll be expecting to be advising

quite a lot on this for for our clients.

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Obviously we're available to do that.

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And I'd like to pass now to Adam,

who will pick up on beneficial

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ownership guidance.

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Thanks Dan.

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Yep, a quick update from me

on the beneficial ownership regime.

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So on the 25th of February this year,

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the Ministry published an updated

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guidance notes on complying

with the beneficial ownership regime

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and that updated guidance is now available

on the registrars website.

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And essentially,

it updates the existing document

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to take into account

some recent amendments

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to our Beneficial Ownership

Transparency Act and regulations.

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Now, I think it's worth

repeating that our clients and listeners

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should ensure that they are aware

of their own personal obligations, as well

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as those of their beneficial owners

under the current regime.

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In other words, not just the obligations

that otherwise sit

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with the corporate service provider

or registered office.

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And as we previously said on this podcast

and as many others have pointed out,

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although the regime does rely relatively

heavily on the registered office to ensure

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that the filing of beneficial ownership

registers works smoothly,

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there are numerous obligations

under the statute that require

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legal entities and their beneficial owners

to take certain actions,

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rather than just relying

on the registered office,

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and one of the reasons

why that is important is that

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we have started to see

the registrar again, reviewing entities

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filed beneficial ownership registers

and investigating where, for example,

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the required

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particulars are still outstanding

and the registrar or the register rather

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has been marked with pending status

for more than three months.

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And in those circumstances,

the registrar will likely seek responses

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from both the registered office

but also from the legal entity itself,

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as to why that beneficial ownership

information remains outstanding.

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And, you know, if no good answers

are given to to rebut the presumption

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of breach, the registrar can and often

will impose administrative

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finds, a topic that we'll come back

to later in this podcast.

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Adam, thanks for that.

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I think you're going to also mention

national risk assessment.

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There's been some updates there,

fact sheet.

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Yeah, yeah.

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Moving on to, you know, the NRA,

the National Risk Assessment,

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as well as the upcoming CF, ATF, mutual

evaluation of the Cayman Islands.

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So on the 2nd of March this year,

the government here published an updated

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25-26 National Risk Assessment

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fact sheet, which is now available

on the government's website.

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And just as a reminder that National Risk

assessment is a periodic review

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conducted by government

effectively to assess, identify

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and understand the jurisdictions risks

regarding money laundering, terrorist

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financing, proliferation financing

and targeted financial sanctions.

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And the fact sheet essentially sets out

it's quite a good, good go to guide.

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It sets out a summary of the objectives,

the strategic importance

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and timing for the NRA,

which has commenced relatively recently,

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and a lot of government

agencies are now busy working on it.

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The document also includes

a helpful FAQ section at the back.

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If you're trying to explain

what it's all about.

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And all of this and the NRA in particular,

is part of Cayman’s

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preparations for the fifth round Caribbean

Financial Action Task Force's (CFATF)

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mutual evaluation of the Cayman Islands,

which is scheduled

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to begin in 2027.

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One point

perhaps worth noting from the fact sheet

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is that some of the procedural steps,

you know, the timelines have been extended

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or pushed back by by sort of five months

or so, including, notably,

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the inherent risk assessment,

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So May this year, with the residual risk

assessment and the National Action Plan

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similarly being pushed back.

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And that may well be positive news

because it gives everyone a little bit

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more breathing space and allows the

potential for more industry consultation.

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Now what we'll be doing,

Chris, is providing

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continued upstate updates

in future podcasts as to both the progress

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of the NRA and the mutual and valuation

as those go forward.

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Yeah, and that's a good point.

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The risk assessment often does

get overlooked, and it's quite a key

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document, particularly

if simplified due diligence.

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You know, you do really need to to know

what's happening on the risk assessment.

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And as you mentioned, the CFATF review

that's coming up soon.

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The focus of that

will be on effectiveness.

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And that segways quite neatly into also,

another update that I want you to

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touch on Adam is some amendments

and proposed consultation

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to more enhance effectiveness

around AML and also sanctions.

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So do you want to talk on those?

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Yeah. You're right. Chris.

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You know, ahead of the mutual evaluation,

which as you say,

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is is typically focused on effectiveness.

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CIMA, so Cayman Islands

Monetary Authority is circulated

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to industry for consultation

to proposed new rules.

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So capital are rules.

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The first is the rule

on effective compliance program

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for AML, CFT, CPF for financial services

providers.

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And the second one is entitled

The Rule on Compliance

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with Financial Sanctions

and Targeted Financial Sanctions.

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And essentially, the two proposed rules

are intended to reflect

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what is already contained within

the AML regulations and the accompanying

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AML guidance notes, rather

than adding anything substantive or new.

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And the reason behind the new rules,

or at least one of them,

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and as communicated to industry by CIMA,

is that one of the criticisms of Cayman

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during the previous

see CFATF inspection was that the AML

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guidance notes were not by themselves

enforceable.

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Right.

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Because, you know, in other words,

the guidance notes they set out

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CIMA’s examples

and description of good industry practice.

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But the only real enforceable breaches

were not of the guidance itself,

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but rather only of the underlying

AML regs.

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And, you know,

reflecting the AML guidance in new rules.

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What that do what that would do

is allow CIMA to address that criticism

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by potentially finding and enforcing,

including by way of Ministry of Fines,

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breaches of those new rules, as well as,

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you know, of the underlying

AML regs themselves.

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So from a sort of CFATF, FATF

40 compliance perspective

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that would allow Cayman to show

to see CFATF at the mutual evaluation,

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you know, that

they're paying more attention or at least,

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you know, getting up to grips

with effectiveness, i.e.

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the evidence of an enforcement route

and program

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rather than just the technical compliance

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which which is having the

the rules and the statutes on the books.

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Now, industry consultation ends this month

or during this month.

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There have been some recent extensions,

I understand,

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so nothing has yet been finalized,

and we expect that some of those industry

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comments will likely be trying

to highlight to CIMA, where perhaps

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the current drafting of the rules

may go further or not accurately reflect

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what's currently within the AML regs

and the guidance notes.

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So certainly a topic to watch

and one for our listeners to,

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to pay attention to in future podcasts.

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Yeah.

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And we've been looking

at that pretty extensively

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and we've shared some comments

with industry associations.

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The deadline I think is next Friday.

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So 20th of March.

So do have a look at that.

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If you can get access to it.

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There's going to be some comments to it.

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But importantly

it does extend to investment funds.

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So this is going to have wide audience

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of vehicles that we captured by it

if it comes in in full form.

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So definitely important item okay Adam.

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Effectiveness

still the key enforcement manual.

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Any updates there.

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Yeah I'm I'm very interested in this one

and I think it's very helpful.

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So earlier

this month CIMA published an updated

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general enforcement manual,

which is now available on its website.

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And the main change here

is the addition of a new discretionary

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publication section

and in particular a new section on.

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And I'm quoting here the procedure

for discretionary publication

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of enforcement actions and administrative

fines.

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Now, in the context

of any enforcement action by CIMA,

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one of the key considerations

for anyone affected and particularly

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our clients, is often

whether the process and ultimate

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finding by CIMA is going to be made public

in any way.

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And there have been multiple examples

as as many of our listeners

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will know where CIMA has publicised

its enforcement successes.

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And in that regard, the new section

in the enforcement manual,

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I think is quite helpful

because it clearly sets out in one place.

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Firstly,

which of the enforcement actions and types

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are required by statute to be made public,

because quite often that's unknown.

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So suspensions

and revocations of licenses.

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For example, the statute requires

publication as opposed

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to the other types of enforcement actions,

including administrative

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fines, where CIMA has the discretion

whether or not to make them public.

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Secondly, the section sets out the process

that CIMA has to undertake

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and the issues it ought to consider before

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exercising its discretion to publicize

the fine or the enforcement action.

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It also sets out what information,

what type of information

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can actually be made public, and generally

what would be about the fine

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when and where that information

can be made public as well.

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So again, you know, really quite helpful,

I think, just to be open about that

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so that everyone knows the process

and the position that CIMA has

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with respect to potential publication

of these types of enforcement actions

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and fines.

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Hand over to to Dan now

to to talk about relevant

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updates in the virtual asset and crypto

space.

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Great.

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Thank you very much, Adam. Yeah.

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The FATF has been busy

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in the virtual asset space

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report on offshore virtual asset

service providers or offshore VASPs.

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And obviously, Cayman Islands

being an offshore jurisdiction in which

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we have a number of operating VASPs,

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there are some important

compliance lessons for that sector.

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And I think it's mandatory reading

for anyone operating in that space.

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So to briefly touch on some of them,

the report is clear

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that regulators are increasingly

looking for compliance officers

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who are based in jurisdiction,

who have unrestricted access

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to customer information,

and who actually hold significant,

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sufficient rather ,seniority

to take independent decisions.

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Now, I point out that that's

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actually something that's required

by the Cayman VASP framework anyway.

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And travel rule

implementation is another area.

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There's been identified

as an uneven rollout of the travel

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rule globally, and that's creating

some monitoring blind spots

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that give rise to risks for VASPs

particularly offshore VASPs.

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And it's noted that VASP

proactively implemented implement

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travel rule compliance,

and that once they can have

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all that originator

and beneficiary information,

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they'll be better position

for cross-border compliance.

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Additionally,

it says that VASPs should apply risk

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based controls quite similar

to those for correspondent banking.

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So it's an area where,

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you know, virtual assets

can learn from tread fire in that respect.

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And that means gathering sufficient

information about your counterparty VASPs,

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assessing their AML controls,

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and obtaining senior management approval

before establishing new relationships.

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Because obviously

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there is a large amount of vast

to vast interface in the crypto world,

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and that gives rise to its own risks.

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So it is incumbent on regulated operators

to assess

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not only themselves,

but their counterparties as well.

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Additionally,

regulators are scrutinizing situations

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where customers are serviced through

pooled or group level arrangements, rather

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than being clearly assigned

to the locally supervised entities.

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And we're we're aware of this

when we're putting in VASP applications.

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The regulators are quite focused

on group level controls and outsourcing.

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And then finally, for Vast

that are operating across

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multiple markets,

which most offshore asks, do you need

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group wide AML controls

that in every jurisdiction are in line

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with the FATF requirements

specifically for Cayman Islands.

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Our regulator, CIMA, featured

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in a case study on cross-border

supervisory cooperation with the Abu Dhabi

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global market, and that investigation

uncovered some governance

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failures and unlicensed activities

with respect to a particular VASP.

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And that resulted in that vast

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cancellation of registration

and some significant penalties.

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So that indicates how robust

cross-border enforcement is now

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part of the landscape in the sector

and will be going forward.

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The second

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aspect of FATF in the virtual assets

world was earlier this month as well.

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They published a targeted report

on stablecoins and on hosted wallets,

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specifically as they relate

to peer to peer transactions.

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So just to give some context, peer

to peer transactions

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on hosted wallets, what does that mean?

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Well, we're talking about direct transfers

of crypto, in this case stablecoins

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between two parties without any

regulated intermediary in between.

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So that's not a whole lot different to,

you know, one individual to another

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doing a cash to cash transaction,

which happens every day.

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However, the bigger risk is because

VASPS are global,

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it's just as easy for stablecoins

and value to to move globally as it be

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unhosted wallets as it is for individuals

to exchange cash among themselves.

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But it's got a much broader

geographical reach, so unhosted wallets

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include things like your hardware

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wallets, your ledger,

your Trezor, and also certain software

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wallets

that you can install and manage yourself.

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And there is some evidence

to back up these concerns, because

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Chainalysis indicated,

actually that stablecoins as a product

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accounted for 84% of a listed

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And the reason for that is stablecoins

have a lot of attractive features

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for legitimate use.

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So they're stable

because they're pegged to a fiat currency,

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they're liquid and they're interoperable

sometimes between different coins.

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But these features also

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make them really attractive

for for criminals and for misuse.

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So the again, the report is recommended

reading for anyone in the sector.

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They do talk about some controls

that might be put in place in the future.

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One that's particularly interesting

is an idea that stablecoin

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issuers themselves could have risk

based controls, like the ability to freeze

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or burn or withdrawal stablecoins

if there's any suggestion of illicit use.

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Also, for operators in the crypto

sector via smart contracts,

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there's also an opportunity

to put some controls in place there, like

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allow listing, deny listing and so on.

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So again,

certainly an example of the FATF

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zeroing in on what they consider

to be high risk sectors.

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And again, recommended

reading for anyone in this space.

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So I think that closes us out.

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I'm going to hand back to Chris

maybe to to take us.

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Yeah. Thanks, Dan.

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Very interesting.

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You obviously got a passion for that

and lots of movement in that area as well.

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So interesting to see where that goes.

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Adam, thank you for your insights to just

before we do close, I did want to mention

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remind everyone on CRS,

which is the common reporting standard.

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To the extent you haven't already looked

at appointing your principal

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point of contact in the Cayman Islands,

please do connect with us

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or your other service providers.

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We're seeing a tremendous

amount of interest

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in that with clients who do have focus on

common reporting standard,

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and we're seeing a lot of inquiries from

the tax authority here relating to CRS.

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And with that,

thanks for listening, everyone.

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Special thanks, Dan joining us.

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Good to see you here.

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And thanks as always Adam. Thanks a lot.