The Financial Action Task Force (FATF) is an intergovernmental body established in 1989 that sets the international standard for anti-money laundering, counter-terrorist financing and counter-proliferation financing. The Cayman Islands’ AML/CFT legislative framework – including the Proceeds of Crime Act (2025 Revision) and the Anti-Money Laundering Regulations (2025 Revision) – is built directly around FATF’s 40 Recommendations, meaning that updates to FATF standards flow through into Cayman law and CIMA’s regulatory practice.
What FATF does and how it assesses countries
FATF produces 40 Recommendations that represent the international benchmark for AML/CFT compliance. It conducts Mutual Evaluation Reviews of member jurisdictions, assessing both the technical quality of their legislation and the effectiveness of its implementation in practice. Countries that fail to demonstrate adequate compliance are placed on FATF’s “Jurisdictions under Increased Monitoring” list – widely known as the grey list. Countries with the most serious deficiencies are identified on a separate high-risk list.
The Cayman Islands’ grey list period (2021–2023)
In February 2021, FATF placed the Cayman Islands on its grey list following a mutual evaluation that identified three strategic deficiencies: the application of proportionate sanctions for AML breaches, the accuracy of beneficial ownership information, and the prosecution of money laundering offences commensurate with the jurisdiction’s risk profile. The Cayman Islands worked to address each deficiency, and in October 2023 FATF confirmed, following completion of its action plan and review process, that all action points had been met – removing Cayman from the grey list.
Why grey list membership matters for Cayman businesses
When a jurisdiction is grey-listed, counterparties – including banks, prime brokers, custodians and institutional investors – are required to apply enhanced due diligence to transactions involving that jurisdiction. During Cayman’s 2021–2023 grey list period, this created additional compliance burdens for fund capital raises, correspondent banking relationships and investor onboarding. Cayman’s removal from the grey list in October 2023 restored its standing and reduced those burdens for businesses operating from the jurisdiction.
FATF’s ongoing influence on Cayman standards
Removal from the grey list confirmed that Cayman’s AML/CFT regime meets FATF’s effectiveness standard – not merely its technical requirements. The Cayman Islands Monetary Authority (CIMA) continues to update its Guidance Notes and supervisory approach as FATF evolves its standards. The February 2024 revision of CIMA’s Guidance Notes reflects FATF’s updated guidance on proliferation financing and beneficial ownership, meaning compliance programmes that were adequate in 2022 may now require updating.
The FATF framework shapes the compliance obligations of every regulated entity in the Cayman Islands – and understanding where those obligations originate helps fund managers maintain standards that survive scrutiny from CIMA, counterparties and institutional investors alike.
Related questions: What is the Cayman Islands’ anti-money laundering legislative framework and which laws apply? | What anti-money laundering obligations apply to an investment manager running a Cayman-domiciled fund? | How does CIMA assess an investment manager’s AML framework during an on-site inspection? | What AML staff training is required for regulated entities in the Cayman Islands?
WB Group provides AML compliance support for fund managers and investment vehicles operating in the Cayman Islands. Contact us to discuss your AML programme or visit our AML compliance service page.
FAQs
The Cayman Islands was removed from the FATF grey list in October 2023, after successfully addressing all three action points identified at the time of its greylisting in February 2021. FATF confirmed that Cayman had achieved a high level of technical compliance with international AML/CFT standards and was implementing them effectively.
Grey list membership triggers enhanced due diligence requirements from counterparties. During Cayman’s 2021–2023 grey list period, some institutional investors required additional assurances and certain banking relationships faced increased scrutiny. Removal from the list in October 2023 restored Cayman’s full standing in international financial markets.
FATF’s 40 Recommendations require countries to impose AML/CFT obligations on financial institutions and certain other businesses. In the Cayman Islands, these are implemented through the Anti-Money Laundering Regulations (2025 Revision) and CIMA’s Guidance Notes, meaning every investment manager conducting relevant financial business must maintain a programme that meets the FATF standard in substance.
A FATF Mutual Evaluation is a peer review in which assessors examine a jurisdiction’s AML/CFT framework – both its legislation and its practical effectiveness. For the Cayman Islands, mutual evaluations are conducted by the Caribbean Financial Action Task Force (CFATF), the regional body of which Cayman is a member.