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Cayman Islands

Cayman Islands

  • Posted: 22/12/2023

                                                                                     Cayman Islands

Why in News

The recent removal of the Cayman Islands from the FATF grey list is expected to boost global private equity investors intending to engage in Indian non-banking financial companies (NBFCs).

Important Points

  • The Financial Action Task Force (FATF), an intergovernmental organisation that establishes anti-money laundering guidelines, has removed the Cayman Islands from its "grey list."
  • In February 2021, the FATF, or Financial Action Task Force, a global money laundering and terrorist financing watchdog, placed the region on the grey list for intensified monitoring.
  • The FATF announced last Monday that the Cayman Islands had fulfilled its commitments in its action plan resolving the strategic shortcomings identified in 2021.
  • In 2020, the European Union added Cayman to its blacklist of tax havens, citing a lack of necessary tax reforms.
  • Aside from Cayman, Panama, Jordan, and Albania have been removed from the list, requiring states to be subjected to enhanced scrutiny until the noted weaknesses in their system are addressed.
  • The FATF has put Bulgaria on its grey list.

Why does the FATF include countries on the "grey list"?

  • Such actions are taken to ensure that governments' anti-money laundering (AML), counter-terrorism financing (CFT), and financing proliferation systems are strengthened.
  • This involves imposing appropriate sanctions on those who fail to file accurate beneficial ownership information and pursuing all sorts of money laundering in accordance with the jurisdiction's risk profile.

What does the change signify for India?

  • The removal of the Cayman Islands from the FATF grey list would provide relief to NBFCs, payment system operators, and alternative investment funds that face restrictions on giving major stakes to investors from non-compliant FATF jurisdictions.
  • The Cayman Islands' removal from the FATF grey list last week will boost global private equity investors eager to engage in Indian non-banking financial companies (NBFCs).
  • Cayman is one of the top 15 foreign portfolio investment jurisdictions in India.
  • For investments in India, several US and European investors prefer to establish holding corporations and funds in the Cayman Islands.

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