Increased Corporate Transparency in the Cayman Islands

The Cayman Islands, a British overseas territory, has long been recognized as one of the world’s leading providers of institutionally focused financial services and a preferred destination for the structuring and domiciling of sophisticated and specialized financial services products, particularly investment funds. However, for a number of reasons, the inherent risks to the Cayman Islands’ financial system of misuse by illicit actors such as money launderers and terrorist financiers are high. Those reasons include the complexity of the products and services on offer, the high value of assets/funds under management, the high volume of cross border activities and transactions that are processed in or through the Cayman Islands, routinely for the benefit of non-resident customers, and customer bases normally comprising significant proportions of traditionally high-risk clientele such as politically exposed persons (“PEPs”), high and ultra-high net worth individuals (“HNWIs”), and corporates owned by foreign ultimate beneficial owners (“UBOs”).

Notwithstanding these inherent risks, the Cayman Islands was removed from the Financial Action Task Force (“FATF”)’s Grey List on October 27, 2023,[1] and then the European Union (“EU”)’s High Risk Third Country list on February 7, 2024,[2] in both cases because of the steps the Cayman Islands has taken in recent times to strengthen the effectiveness of its anti-money laundering and combatting the financing of terrorism (“AML/CFT”) regime and to address certain strategic deficiencies. This is a significant victory for the Cayman Islands. Although a small collection of islands in the western Caribbean Sea spanning only 264 square kilometers (approximately 100 square miles) and comprising a population of less than 100,000 people, the economy depends upon a thriving financial services sector and the most immediate and notable impact of the FATF and EU delistings should be a reduction in due diligence requirements on Cayman-domiciled entities, easing the administrative burden when moving capital in and out of the jurisdiction.

In this article, we focus on one of the key new pieces of domestic Cayman Islands legislation that was pivotal to the delisting effort: the Beneficial Ownership Transparency Act of 2023 (“BOTA”), which was passed by Parliament on December 15, 2023.[3] BOTA will be brought into force in 2024 via a set of implementing regulations and will align the Cayman Islands’ beneficial ownership framework with the UK’s own regime.

DOJ Promises Whistleblower Rewards Pilot Program and Adds AI Risk to Its Evaluation of Corporation Compliance Programs

By Kathleen McGovern and Sanaa Bayyari on March 12, 2024 Posted in Anti-corruption, Commercial Bribery, Commodities Futures Trading Commission, Compliance Program, Corporate compliance, Corruption, FinCEN, Government Investigation, Industry Investigations, Technology, U.S. Securities and Exchange Commission, United States, US Department of Justice, Whistleblowing

On March 7, 2024, US Deputy Attorney General, Lisa O. Monaco announced the development of a new “DOJ-run whistleblower rewards program” during her speech at the American Bar Association’s 39th National Institute on White Collar Crime.[1] The announcement signals “a 90-day sprint to develop and implement a pilot program, with a formal start date later this year.” And Acting Assistant Attorney General Nicole Argentieri provided further clarification on March 8 at the same conference, noting that “[w]e believe that we can make the greatest impact by offering financial incentives to disclose misconduct in areas where no such incentives currently exist.”

DAG Monaco explained that since the creation of Dodd-Frank, other whistleblower programs at the SEC and the CFTC, and similar ones at IRS and FinCEN, have “proven indispensable.” However, these programs were limited in scope and did not address “the full range of corporate and financial misconduct that the Department prosecutes.”

The UAE Exits FATF’s Grey List

By Richard Gibbon, Nima Fath and Malak Abbas on February 27, 2024 Posted in Anti-corruption, Anti-money laundering, Compliance Program, Corporate compliance, Corruption, FATF, Financial Action Task Force, Middle East, Sanctions, Sanctions, United Arab Emirates

The authors wish to thank Molly McKenna for her contributions to this post.

On February 23, 2024, the Financial Action Task Force (“FATF”) removed the United Arab Emirates (“UAE”) from its list of jurisdictions under increased monitoring (the “Grey List”). As noted in our previous article (see here), FATF had intimated at its October 2023 Plenary that the UAE may be next off the Grey List as it had undertaken multiple key reforms to improve its overall anti-money laundering and combating the financing of terrorism (“AML/CFT”) compliance framework.

The SDNY Whistleblower Pilot Program Within the Framework of Corporate Criminal Enforcement

By Benjamin Glassman and Cheryl Risell on February 26, 2024 Posted in Anti-corruption, Anti-money laundering, Bribery, Compliance Program, Corporate compliance, Corruption, Courts, Department of Justice, Industry Investigations, United States, US Department of Justice, Whistleblowing

The United States Attorney’s Office for the Southern District of New York recently announced a policy—called the “SDNY Whistleblower Pilot Program”—that seeks to encourage individuals to voluntarily disclose financial crimes in which they themselves participated. First unveiled in January 2024 and then revised this month, the policy sets forth the circumstances under which SDNY says that it will grant a non-prosecution agreement to an individual in exchange for the individual’s cooperation. As we explain, while it remains uncertain whether and when it might make sense for any individual to come forward under the policy, the existence of the program has implications for corporate internal investigations.

Navigating Shifting Legal Landscapes: Implications of Deputy Attorney General Lisa Monaco’s Address to Oxford University on Artificial Intelligence

By Colin Jennings and Jay Thomas on February 21, 2024 Posted in Corporate compliance, Courts, Cybersecurity, Department of Justice, Intellectual Property, Technology, United States, US Department of Justice

Deputy Attorney General Lisa Monaco’s (“Monaco”) recent remarks at Oxford University shed light on the evolving intersection of artificial intelligence (“AI”) and the criminal enforcement landscape and its profound implications for the United States Department of Justice and beyond. As the Chief Operating Officer of the Department of Justice, Monaco’s insights underscore the critical importance of understanding and navigating the complex relationship between AI and criminal defense, particularly in the realm of white collar crime.

Managing and Reporting Third-Party Cybersecurity Incidents Under the New SEC Cyber Risk Regulations

By Colin Jennings, Benjamin Glassman, Luke Burton and Elizabeth Safier on February 15, 2024 Posted in Compliance Program, Corporate compliance, Cyberattack, Cybersecurity, Data Protection & Privacy, Government Investigation, Securities Litigation and Enforcement, U.S. Securities and Exchange Commission, U.S. Securities and Exchange Commission, United States

The rules on reporting cybersecurity risks and incidents pose many challenges for companies. Those challenges can be even more difficult when the cybersecurity incident affects third-party systems. With no exceptions for third-party cybersecurity incidents under the new cybersecurity reporting regulations, companies should take proactive steps to assess and respond appropriately to third-party cybersecurity incidents.

The SEC’s New Cyber Risk Regulations

In July 2023, the U.S. Securities and Exchange Commission (“SEC”) promulgated new regulations (“Cyber Risk Regulations”) that, among other things, require public companies to report cybersecurity incidents within four business days of a materiality determination via Item 1.05(a) on Form 8-K. See SEC Adopts Final Cybersecurity Risk Management and Incident Disclosure Regulations, from our colleagues at Privacy World.

Webinar: The New Foreign Extortion Prevention Act – What It Means for US Companies

By Squire Patton Boggs on January 22, 2024 Posted in Anti-corruption, Bribery, Commercial Bribery, Compliance Program, Corporate compliance, Corruption, Foreign Corrupt Practices Act, Foreign Corrupt Practices Act (FCPA), Government Investigation, Industry Investigations, United States, US Department of Justice

Please join us on Tuesday, January 30 for a discussion about “the most consequential anti-foreign-bribery law passed in almost 50 years”: the Foreign Extortion Prevention Act (FEPA).

FEPA allows the DOJ to prosecute foreign officials who demand or accept a bribe from a U.S. citizen or company. Our seasoned team of three former Department of Justice (DOJ) prosecutors – including Tom Firestone, a key player in drafting the legislation, Kathleen McGovern, former senior deputy chief of the Fraud Section supervising FCPA Unit and former FCPA prosecutor, and Jerrob Duffy, former chief of the DOJ Fraud Section’s Litigation Unit and senior FCPA prosecutor – will discuss the Act and its implications for US companies.

Tuesday January 30, 2024

Noon – 1 p.m. ET

Details and registration information

Additional insights (subscription may be required):

Wall Street Journal: U.S. Prosecutors Can Charge Foreign Officials With Bribery Under New Provision
Bloomberg Law: Foreign Bribe Taking Targeted in US Defense Authorization Bill (Correct) (bloomberglaw.com)
Law360: How US Companies Can Wield The New Foreign Bribery Law – Law360

Recent Changes to FATF’s “Grey List”; Could the UAE be Next Off the List?

Between October 25 and October 27, 2023, the Financial Action Task Force (“FATF”), an international policy-making and standard-setting body dedicated to combating money laundering and terrorist financing, held its third plenary meeting of the year (the “October Plenary”), at which it made important updates to its list of jurisdictions under increased monitoring, often externally referred to as the “Grey List,” adding Bulgaria and removing Albania, the Cayman Islands, Jordan, and Panama. These developments are testament to the significant progress the four delisted countries have made in enhancing their anti-money laundering (“AML”), combating the financing of terrorism (“CFT”), and counter proliferation financing frameworks, but point to strategic deficiencies in the current Bulgarian regime. FATF also determined in the October Plenary that no changes to its list of high-risk jurisdictions subject to a call for action, often externally referred to as FATF’s “Black List,” were warranted.[1]

FEPA: the New Tool in the DOJ’s Fight Against Corruption

By Tom Firestone, Kathleen McGovern, Richard Gibbon and Sassi Riar on January 16, 2024 Posted in Anti-corruption, Bribery, Commercial Bribery, Compliance Program, Corporate compliance, Corruption, Department of Justice, Extradition, FCPA Jurisdiction, Foreign Corrupt Practices Act, Foreign Corrupt Practices Act (FCPA), Government Investigation, United States, US Department of Justice

On December 22, 2023, President Biden signed into law the Foreign Extortion Prevention Act (hereinafter “FEPA” or the “Act”) which was passed by the US Congress as part of the Fiscal Year 2024 National Defense Authorization Act. The Act aligns with the current administration’s national security agenda in that it broadens the scope and reach of US anti-bribery and corruption laws.

U.S. Sanctions Review: A Recap of OFAC’s Recent Enforcement Actions (Second Half 2023)

The second half of 2023 saw eight enforcement actions from the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”). These actions reflect a range of penalties, industries, sanctions programs, conduct, and lessons learned. Below are some highlights from OFAC’s enforcement releases and settlement agreements.

Penalties

OFAC imposed a total of $984,851,289.90 in penalties during the second half of the year, ranging from $31,867.90 against New York-based Emigrant Bank (“Emigrant”) to $968,618,825 against Binance Holdings, Ltd. (“Binance”), a Cayman Islands virtual currency exchange with affiliates around the world. In one settlement, for $1,207,830 with CoinList Markets LLC (“CLM”), a California-based virtual currency exchange, OFAC suspended $300,000 of the settlement amount considering “the individual facts of this case, including CLM’s financial circumstances.” This amount is suspended pending satisfactory completion of CLM’s compliance commitments as agreed to in the settlement. Additionally, as partial satisfaction of the settlement amount, CLM agreed to invest $300,000 in additional sanctions compliance controls.