Overview of Financial Sanctions

International financial sanctions are imposed on countries, regimes, or individuals identified as violating international laws. These sanctions are intended to:

1. Influence the behavior of targeted countries, regimes, or individuals;
2. Enforce punitive measures when international peace and security are at risk, especially after diplomatic efforts have been exhausted; and/or
3. Deter, prevent, or suppress acts of terrorism. The United Nations (UN), through resolutions passed by the UN Security Council (UNSCRs), and the European Union (EU), through EU regulations, are two key international bodies that implement these sanctions.

Occasionally, the UK Government issues Orders in Council to implement UN or EU sanctions, extending them to its Overseas Territories. In the Cayman Islands, as a British Overseas Territory, these Orders carry the force of law, and any violations can result in fines or criminal charges. UNSCRs related to terrorism and proliferation financing are also enforced through the Terrorism Act and the Proliferation Financing (Prohibition) Act.

Anti-Proliferation Financing Orders

Under the Proliferation Financing (Prohibition) Act, the Financial Reporting Authority (FRA) can issue directives to individuals or groups within the financial services sector regarding terrorist financing, money laundering, or the development of weapons of mass destruction, known as “proliferation activities.” These directives may include enhanced customer due diligence, ongoing monitoring, systematic reporting, and cessation of business. Non-compliance with these directives can result in penalties under the Proliferation Financing (Prohibition) Act.

Responsibilities of Financial Service Providers

Financial service providers (FSPs) are required, under the Anti-Money Laundering Regulations, to implement systems and controls for initial due diligence, ongoing monitoring, and reporting. When sanctions lists are updated, FSPs may find that certain sanctions apply to their clients. If an FSP identifies a relationship that violates an Order or directive under the Terrorism Act or Proliferation Financing (Prohibition) Act, they must report this to the FRA and may be required to freeze assets.

For further information, consult the Guidance on Targeted Financial Sanctions issued by the Financial Reporting Authority, which outlines sanctions reporting obligations.

Applying for a Licence under Restrictive Measures or UN Sanctions (Overseas Territories) Orders

To determine if a licence is available for activities that would otherwise be prohibited, consult the relevant Order.

An application for a licence, which allows for the desired activity, must be submitted in writing to the Financial Reporting Authority. The licence application form is available in the Guidance on Targeted Financial Sanctions issued by the Financial Reporting Authority.