Black Immigrant Daily News
Readers are asked to note that Op-eds do not necessarily reflect the opinions or beliefs of Loop Cayman.
by Alric Lindsay
While some stakeholders in the financial services industry may simply view the case of the Queen versus Canover Norbert Watson and Bruce Andrew Blake as just another trial, I believe that the outcome has other, far-reaching implications.
One prediction, for example, is that the Financial Action Task Force (FATF) may now consider putting the Cayman Islands back into its good books in respect of the Cayman Islands’ approach and attitude towards the prosecution of cases related to money laundering.
As to why the Cayman Islands are seeking the good grace of the FATF, those in the financial services industry will recall that the FATF noted at the conclusion of its plenary on October 21, 2022 that the Cayman Islands would remain on the FATF ‘grey list’ i.e., the list of countries subject to increased monitoring, until the Cayman Islands could address certain strategic deficiencies, including by demonstrating that the Cayman Islands are prosecuting all types of money laundering cases in line with the jurisdiction’s risk profile and that such prosecutions are resulting in the application of dissuasive, effective, and proportionate sanctions.
The FATF also urged the Cayman Islands to swiftly complete an action plan by February 2023 as all deadlines have now expired and to address the above-mentioned strategic deficiency.
While the FATF did not state what would be the impact of the Cayman Islands not curing strategic deficiencies by the February 2023 deadline, I think that any failure to do so may result in the Cayman Islands remaining on the grey list or even becoming blacklisted.
Now that the Cayman Islands has the Watson-Blake prosecutions in hand, however, the Cayman Islands may have now repositioned itself to become a fully compliant jurisdiction with respect to the FATF October plenary requests, in particular, by demonstrating a strong stance against the proceeds of crime and successfully getting a conviction in a money laundering case.
Unfortunately, the Watson-Blake prosecutions may have also, inadvertently, cast somewhat of a dark cloud over the legal profession.
This is because Mr Blake is a lawyer and reportedly worked as a lawyer in the structured finance department of an offshore magic circle law firm in the Cayman Islands and overseas prior to, and around the time of, the offences.
With Mr Blake being a part of the Cayman Islands’ legal profession and the offences having taken place while working for a significantly large law firm, I think that the FATF and/or the Caribbean Financial Action Task Force (CFATF) might consider taking a closer look at the legal profession on their next visit to the Cayman Islands.
One of the outcomes of such an exercise may be for the FATF or CFATF to determine whether the “medium-high risk” rating in relation to the inherent risk assessment of International and Domestic Supervised Firms stated in the Cayman Islands’ National Risk Assessment remains appropriate (see table below).
Inherent risk assessment from the Cayman Islands National Risk Assessment
The FATF or the CFATF may also consider whether there are any other inherent vulnerabilities in the legal profession.
Regarding such vulnerabilities, the Cayman Islands National Risk Assessment document dated March 2022 said:
The inherent vulnerabilities of the legal profession must be seen in the context of the jurisdictional vulnerabilities facing the Cayman Islands. These have been identified as being the risk that the Cayman Islands’ financial system could be used as a conduit for the proceeds of financial crime generally, and fraud, bribery and corruption, tax evasion, and drug trafficking specifically. These threats are usually predicated upon the commission of crimes abroad and the decision to funnel those proceeds through structures, transactions, and accounts in the Cayman Islands. The most significant danger for the legal community is the direct participation of firms in that movement of funds through their involvement in such transactions and or the usage of their accounts.
One such inherent vulnerability, in my view, is the prevalence of persons outside the Cayman Islands who are practising Cayman Islands’ law outside the jurisdiction without a Cayman Islands legal practice certificate.
The FATF and the CFATF will, no doubt, find this ongoing practice surprising and will take note that there is no substantial mention of it in the National Risk Assessment in terms of possible impacts on the overall risk assessment for the legal profession.
Exacerbating the situation is that there do not appear to be any plans to apply penalties or fines or to prosecute anyone for the practice of Cayman Islands law outside Cayman for decades without a Cayman Islands legal practice certificate.
Instead, it may be the case (and frightening to imagine if it happens) that regulations may be passed by the Cabinet of the Cayman Islands government to grandfather-in these persons without any fines or prosecution.
In my view, such an action, if done by the Cabinet, would go against the FATF plenary’s material point that strategic deficiencies should be addressed in a number of ways, including by prosecuting cases in line with the jurisdiction’s risk profile and ensuring that such prosecutions are resulting in the application of dissuasive, effective, and proportionate sanctions.
In the circumstances, Cayman authorities should be encouraged to not turn a blind eye to this risk area and, instead, adequately address it to determine how it may impact the overall risk assessment for the legal profession.
Failure to do so may result in the FATF or CFATF launching criticism of the Cayman Islands’ national risk assessment process and, perhaps, leaving the Cayman Islands on the grey list or worse, come February 2023 (the FATF deadline for the Cayman Islands to comply in respect of strategic deficiencies noted in the October plenary meeting).
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