UBO Information in Cayman is safe from prying eyes
07 April 2021
The Cayman Islands (“Cayman”) Ministry of Finance recently reiterated that the storage of Beneficial Ownership (“BO”) information in Cayman remains secure, and that BO information is only accessible by the Cayman competent authority, the General Registry (“Registry”). The information is held in an isolated offline server with no internet access to the system and information is encrypted once submitted.
What is the definition of beneficial owner?
An individual needs to be registered as the beneficial owner of a company or limited liability company (“LLC”) where:
The individual holds, directly or indirectly:
- 25% or more of the shares in the company or,
- an LLC interest representing a right to share in 25% or more of the LLC’s capital or profits; or
- 25% or more of the voting rights in the company/LLC; or
- the right to appoint or remove a majority of either the board of directors of company or the managers of the LLC.
If no individual in the company meets these conditions, the beneficial owner is the person who (directly or indirectly) has or exercises significant influence or control over the company, through either direct or indirect ownership. This does not apply if such control is solely in the capacity of a manager, director, or adviser.
A relevant entity is one which is incorporated, formed or registered in Cayman which would be a beneficial owner if it were an individual.
Why must companies submit information?
Certain Cayman companies and limited liability companies (“LLCs”) which come within the scope of the relevant legislation are required by law to maintain and file BO information to the Registry, as the competent authority. Directors of Cayman companies and LLCs should check whether their company or LLC falls within the scope of the legislation and regulations. The requirement to provide the information is in line with international standards and commitments to combat money laundering, tax evasion and terrorist financing. The BO regime is aimed at improving the exchange of information between Cayman and international regulatory, enforcement and tax authorities. Once filed, the information will be stored on the Registry’s centralised BO platform.
Who does not need to have a BO register?
Partnerships established in the Cayman Islands, including exempted limited partnerships, as well as foreign companies registered as such under the Companies Law and, notably, Cayman Islands trusts and bodies which are not legal persons, are not In Scope of the Legislation and so are not required to maintain a Register.
There are also various exemptions for in scope entities e.g. listed on the Cayman stock exchange or registered/regulated under Cayman laws or regulated in an equivalent jurisdiction as well as subsidiaries (as widely defined) of such entities. Analysis of whether exemptions apply can be complex.
Who can access this information, and when?
BO information is only accessible by the Registry in its role as competent authority. It can access the filing system to monitor the current state of BO information and analyse any deficiencies, which informs and supports local enforcement and international compliance efforts.
Is it held securely?
The information is held in an isolated offline server with no internet access to the system and information is encrypted once submitted. All BO data, upon submission via a Corporate Services Provider, is encrypted. The data is further obfuscated once it enters the filing system, which is housed in an isolated, non-internet facing, offline server. This was independently assessed by local firm KPMG when the system was created in 2018 and a recent review of the security of the filing system was recently completed by a local firm offering risk advisory services. The assessment, which incorporated best practices as applied by the SANS Institute and Sherwood Applied Business Security Architecture, found no significant issues.
What are the consequences if the information is not submitted?
As the competent authority for BO in Cayman the Registry has the power to enforce BO compliance. If a company does not comply with the requirement to file beneficial ownership information, it could be struck off the Companies Register. Warning letters are sent to the companies prior to the fines being levied, but since 29 June 2020 the fine regime allows an initial fine for a breach of US$6,100. If the breach continues, the company may be fined US$1,200 per month up to a maximum of US$30,000. The Registrar has power to strike off the company if a fine remains unpaid for 90 days. According to a 15 February 2021 press release, as at 1 February 2021, the Registry had issued 19 administrative fines against companies for noncompliance with beneficial ownership ("BO") requirements.
What is the BO information for?
The competent authority uses the filing system to monitor the current state of BO information and analyse any deficiencies, which informs and supports local enforcement and international compliance efforts.