Cayman Islands real estate brokers and precious metals dealers will soon come under extra scrutiny when a new regime kicks in subjecting them to inspections from the Department of Commerce and Investment, which will make sure they are following the territory’s anti-money laundering rules.
Though the new arrangement was made public in early 2016 in preparation for a Financial Action Task Force inspection that will take place next month, details about what is expected from the brokers and jewelers have yet to be finalized. Businesses have yet to receive a handbook spelling out exactly what the DCI expects, and there are no penalties in place that the DCI could levy for non-compliance.
While the rules businesses are expected to abide by are clear, “how they’re going to monitor us is another story,” said Kirk Freeport financial controller Celine Macken.
Until the DCI announced a workshop in October, some businesses were not even aware that they would be subject to additional reporting requirements.
“They sent out an invitation to us three or four days before the conference, but we didn’t know what it was about,” said RE/MAX co-owner James Bovell.
Nevertheless, Bovell, Macken and others in the impacted industries say they have practiced for years strict internal procedures to prevent money laundering and other financial wrongdoing taking place through their businesses, and should be able to easily demonstrate compliance with the DCI.
The Cayman Islands Real Estate Brokers Association has always subjected its members to standards that go above and beyond what government requires, according to Bovell’s colleague, RE/MAX co-owner Kim Lund.
Lund said CIREBA has an independent inspector on contract that audits brokers randomly, and gives them a rating based on what the audits find. Additionally, CIREBA members undergo yearly training to stay up to date with the territory’s regulations, he said.
Non-CIREBA members might be taken off guard by the DCI, Bovell added, but the new regime may also require them to increase their due diligence.
In an interview in October, Lund and Bovell described some of the steps RE/MAX takes to ensure that their clients and customers are undertaking legitimate business.
“If someone comes to us for any transaction – buying or selling – we take copies of their passport, utility bill showing their physical address, or a license from them,” said Lund. “So we’ve got two or three pieces of ID that we put on file immediately.”
“We do ask for source of funds, as well,” added Bovell, who also said that RE/MAX does background checks to see if clients might be politically exposed persons.
Such measures have come in handy in the past: Lund and Bovell said that they once reported a man who was trying to sell someone else’s land, leading to the man’s arrest and prosecution.
Other suspicious activity seen by the brokers includes people from overseas asking for a signed contract before they wire their deposit to RE/MAX.
“They’ll say, ‘Our bank won’t release funds until vendor signs contract.’ That’s suspicious, too, because really they want the signed contract so they can go around showing they bought this property,” said Lund. “We feel the people use that to say they have this property in the Cayman Islands, and use it as means to borrow money. I’ve had this happen a couple times, and we report situations like that.”
However, “long gone” are the days of when people would attempt to purchase land with only cash, or conduct other blatantly suspicious activity, he said. With Cayman having stricter anti-money laundering rules than most other jurisdictions, Bovell said most people would not even attempt to engage in wrongdoing.
Similarly, Kirk Freeport financial controller Celine Macken said she rarely has to flag transactions as suspicious. Most transactions at the jeweler retailer are conducted via credit card or debit card, and are thus subject to oversight by financial institutions, she explained.
“You can’t vet everyone that comes through the door, but that’s what electronic payments are for,” said Chris Kirkconnell, Kirk’s vice president of operations.
Kirk Freeport employees are simply told to check customers’ identification to ensure against credit card fraud, and to take copies of the ID if transactions are larger than $10,000, Macken said. When fraud is detected, they go straight to the police rather than any financial regulator.
“Every now and then, we’ll see fake credit card rings,” said Kirkconnell. “We’re normally the ones that catch them and alert the authorities. Because for us, we’re dealing with high value merchandise and need to cover ourselves.”
Beyond that, there is not much precious metals dealers can do when it comes to curtailing financial wrongdoing, he said.
“We wouldn’t have any customers if we have to act like a bank for every transaction,” he said.
Macken said she hopes the DCI takes that into account as the precious metals industry’s new regulator.
“The biggest thing is they have to recognize how business works,” she said.
With the FATF inspection scheduled for Dec. 4-15, the DCI will have to clarify what it expects from the real estate and precious metals industries soon.
DCI Head of Compliance Claudia Brady said at her department’s workshop last month that the biggest thing businesses can do is keep records of their transactions, know-you-client background checks, and evidence of how they train staff to detect suspicious activity.
If companies do not have that documentation, the Department of Commerce and Investment may conduct onsite inspections and review their documents, she said at the time.
Even though the FATF inspection is right around the corner, Brady promised that businesses would have fair warning of what is expected of them by the DCI.
“We won’t just turn up at your door. We’re going to give you notice – maybe three weeks, a month, or two months so you have time to prepare,” she said. “We appreciate the fact that you’re a business, and we don’t want to disrupt your business.”