The Rule on Compliance with Financial Sanctions and Targeted Financial Sanctions – the Sanctions Rule – is a separate instrument from the AML/CFT/CPF Compliance Rule, issued under sections 6(1)(b) and 34(1) of the Monetary Authority Act, and it also took effect on 18 September 2026. It requires financial services providers regulated by the Cayman Islands Monetary Authority (CIMA) to screen customers and counterparties against sanctions lists, freeze designated persons’ assets without delay, and report sanctions-related matters to the Financial Reporting Authority (FRA).
A distinct instrument, not a subset of the AML Rule
Money laundering and financial sanctions are related but legally distinct risks, and CIMA regulates them through two separate Rules rather than folding sanctions into the broader AML/CFT/CPF Compliance Rule. A fund needs a compliance programme that satisfies both instruments; meeting one does not automatically satisfy the other.
The Rule also notes that compliance with financial sanctions is, in the Cayman Islands, a legal obligation on everyone – individuals and businesses generally, not only CIMA-regulated financial services providers (FSPs) – with this Rule setting out specifically how CIMA-regulated entities must meet it.
Screening and re-screening obligations
The Rule requires FSPs to screen applicants, customers, beneficial owners, transactions, service providers and connected persons to determine whether they involve a designated person or a sanctioned country. Screening is not a one-time step at onboarding: FSPs must re-screen all existing customers and connected persons “without delay” whenever a sanctions list is updated, regardless of the customer’s existing due diligence risk rating, and must not rate a customer’s geographic risk as “low” where that customer’s country is subject to United Kingdom, United Nations, United States or OFAC sanctions.
Freezing assets without notice
Where a match is identified, the Rule requires FSPs to freeze the relevant funds or economic resources “without delay, and without prior notice,” and to document the rationale for every action taken. Frozen assets must not be made available, directly or indirectly, to a designated person or an entity acting on their behalf, unless a licence from the Governor or an authorisation under the Terrorism Act or the Proliferation Financing (Prohibition) Act applies. Unfreezing must follow guidance from the FRA once a person is no longer subject to an asset freeze.
Training and reporting to the FRA
FSPs must provide staff with regular training on identifying designated persons and frozen assets and on the steps to follow once they are identified. Reports go to the FRA using a Compliance Reporting Form (CRF): an FSP must file a CRF without delay if it knows or suspects it holds a designated person’s funds. An FSP must also file a CRF if it discovers a relationship that contravenes a sanctions order or a direction under the Proliferation Financing (Prohibition) Act.
A compliance programme built only around money laundering risk will not, on its own, satisfy the Sanctions Rule’s screening and asset-freezing requirements.
Related questions: What is CIMA’s AML/CFT/CPF Compliance Rule, and when did it take effect? | Which Cayman Islands entities are in scope of CIMA’s AML/CFT/CPF Compliance Rule?
wb.group helps funds and managers build sanctions screening and reporting procedures alongside their broader AML/CFT/CPF programme. Contact us for more information.
FAQs
The Rule on Compliance with Financial Sanctions and Targeted Financial Sanctions – the Sanctions Rule – is a separate instrument from the AML/CFT/CPF Compliance Rule, issued under sections 6(1)(b) and 34(1) of the Monetary Authority Act, and it also took effect on 18 September 2026. It requires financial services providers regulated by the Cayman Islands Monetary Authority (CIMA) to screen customers and counterparties against sanctions lists, freeze designated persons’ assets without delay, and report sanctions-related matters to the Financial Reporting Authority (FRA).
Broadly yes – both Rules apply to FSPs regulated and supervised by CIMA – though an entity should confirm its position under each Rule separately, since they are distinct instruments with their own requirements.
Reports are made to the Financial Reporting Authority (FRA) using a Compliance Reporting Form, including where an FSP knows or suspects it holds a designated person’s funds, or discovers a relationship that contravenes a sanctions order.
No. The Rule specifically prohibits rating a customer’s geographic risk as “low” where the customer’s country is subject to UK, UN, US or OFAC sanctions, regardless of how low-risk the customer otherwise appears.
Yes. The screening obligation extends to applicants for business, customers, beneficial owners and connected persons, which for a fund includes prospective and existing investors, not only trading counterparties.