Trust Business Overview

According to Section 2 of the Banks and Trust Companies Act, "trust business" refers to the activities of acting as a trustee, executor, or administrator.

Regulation of Trust Business

The regulation of the trust industry in the Cayman Islands is governed by the Banks and Trust Companies Act and the Private Trust Companies Regulations. This includes responsibilities related to licensing, registration, and ongoing supervision, all of which are overseen by the Cayman Monetary Regulatory Authority International.

Licence and Registration Categories

Under the Banks and Trust Companies Act, the following categories of trust licences and registrations may be issued:

• Trust Licence - Authorizes the holder to conduct trust business as defined above.
• Restricted Trust Licence - Permits the holder to conduct trust business solely for individuals listed in the application accompanying the licence request.
• Nominee (Trust) Licence - Allows the holder to act solely as a nominee for a trust licensee, specifically as a wholly owned subsidiary of that licensee.
• Controlled Subsidiary Registration - Enables the registrant to provide trust services, including issuing debt instruments, without a licence, as long as it is related to the trust business of its parent company that holds a trust licence.
• Private Trust Company Registration - Permits the registrant to offer trust services to "connected persons," as defined in Section 2(2) of the Private Trust Companies Regulations.

Regulatory Standards

The Cayman Monetary Regulatory Authority International regulates trust business in accordance with:

• The Banks and Trust Companies Act, the Private Trust Companies Regulations, the Monetary Authority Act, and other relevant local laws such as the Proceeds of Crime Act and the Companies Act.
• The rules, guidance, policies, and procedures issued by the Cayman Monetary Regulatory Authority International (see Trust Regulatory Measures).
• The Standard on the Regulation of Trust and Company Service Providers issued by the Group of International Finance Centre Supervisors (GIFCS).

Supervisory Role

The Fiduciary Services Division is responsible for:

• Processing applications for all Trust Companies without a banking licence and making recommendations to the Management Committee on whether to issue a licence.
• Handling registrations for Controlled Subsidiaries or Private Trust Companies.
• Ongoing supervision and regulation of licensed Trust Companies through the analysis of audited financial statements, meetings with management, and detailed reports or audits on internal controls and systems. Assessments include capital adequacy, asset quality, management competence, earnings, and liquidity.

On-site and Off-site Supervision

The Authority aims to maintain a top-tier financial system with a supervisory framework that aligns with international standards. This involves both off-site and on-site reviews, continuously updated in response to industry developments.

On-site reviews focus on evaluating the licensees' control environment and compliance with laws, regulations, and directives. These inspections include transaction testing to ensure effective controls and the fulfillment of fiduciary duties. Discussions with external auditors assess the strength of internal controls, legal compliance, and the adequacy of provisions.

The supervisory system's goal is to promote sound fiduciary practices, enhancing the financial sector. If a licensee engages in activities that threaten public interest or client asset safety, the Authority has the power to impose remedial actions, such as revoking or conditioning licences and changing management or directors.