New show and tell regulations for Cayman trustees

Two new pieces of Cayman Islands ("Cayman") legislation have introduced important new obligations for trustees of Cayman trusts and Cayman trust companies. There are new obligations on trustees to keep records on those connected with the trust (including service providers). Both trustees and trust companies will have to disclose their status as trustees in certain circumstances. The Registrar of Trusts is now obliged to share information to allow regulatory and enforcement bodies to discharge their functions, and there are powers which give competent authorities the ability to request information. There are new regulations which set out details of the obligations. 

What is the new legislation?
The new obligations are contained in:

(i) the Trusts (Amendment) (No. 2) Law, 2019 ("Trust Amendment"), which amends the Trusts Law (2018 Revision) ("Trust Law") and
(ii) the Banks And Trust Companies (Amendment) Law, 2019 ("BTCL Amendment"), which amends the Banks and Trust Companies Law (2018 Revision).

Details of the recording obligations are set out in The Trusts (Transparency) Regulations, 2019 ("Trust Regulations") and the Private Trust Companies (Amendment) (no. 2) Regulations, 2019, ("Trust Company Regulations"), published on 16 August 2019.

What records will trustees need to keep?
The Trust Amendment requires trustees to maintain and keep up to date:

a) an accurate record of the identity and particulars of: (a) a settlor; (b) a contributor to the trust; (c) a beneficiary; (d) a protector; (e) an enforcer of the trust; (f) a service provider to the trust, including any investment adviser, manager, accountant or tax adviser; and (g) the person exercising ultimate effective control of the trust.

b) such accounting records relating to the trust as may be prescribed.

A significant change is the need to establish the identity and details of service providers such as a trust's investment adviser, manager, accountant, or tax adviser. The records and accounts must be kept in the format prescribed and for as long as prescribed by the Trust Regulations.

What do the Trust Regulations provide?
The Trust Regulations provide that for each trust, the trustee shall keep and maintain current copies of the trust deed or other documents containing or recording:

• The terms of the trust and any deed or other document varying the terms of the trust; and
• The name and address of: the trustee, the settlor; any contributor to the trust; any specifically named beneficiary; any identifiable class of beneficiary; any protector; and any enforcer of the trust.

Where it is not reasonably practicable for a trustee to identify each beneficiary in a class of beneficiaries, they must keep and maintain up-to-date information which sufficiently identifies and describes the class of persons who are beneficiaries. Where there has been a transfer between trusts, the definition "contributor" is the transferor trust and "beneficiary" is the transferee trust. The definition of beneficiary where there is a distribution to a minor or unincorporated charity is the person who gives the receipt for the distribution.

What are the rules on format and retention?
Trustees must take reasonable steps to ensure that they keep an adequate and accurate record of the information required which is: easily accessible; legible or easily rendered visible and legible; in English or translated into English; and updated in a timely manner. The information must be retained for a period of at least five years after the trustee ceases to be a trustee of the trust. If a competent authority makes a request in writing for any of the information, the trustee must take reasonable steps to ensure that an accurate and adequate record is provided within forty-eight hours.

Are there penalties?
A trustee who, without reasonable excuse, fails to comply with the Trust Regulations commits an offence and is liable on summary conviction to a fine of CI$5,000 (US$6,097).

What do the Trust Company Regulations provide?
There are amendments to the documents required to be kept at the registered office of a private trust company under the existing Private Trust Companies Regulations (2013 Revision) ("2013 Regulations"). These include the name and address of the settlor and of any protector and any enforcer. Two new definitions are added:

• "Enforcer" (a person who has standing to enforce a special trust); and
• "Protector" (a person appointed under a trust instrument to direct or restrain a trustee in relation to the trustee’s administration of the trust).

When and how does trustee status have to be disclosed?
Where, in their capacity as a trustee, a person or trust company forms a business relationship or enters into a one off transaction with a person conducting relevant financial business, they must take reasonable steps to inform that person that they act as trustee either before or at the time they enter into the relationship or transaction. Under the BTCL Amendment, trust companies also have to disclose that they are carrying on trust business. What constitutes relevant financial business is set out in Schedule 6 of the Proceeds of Crime Law (2019 Revision).

Does the Registrar of Trusts have to share information?
The Trust Amendment empowers Cayman regulatory and enforcement bodies and competent authorities to ask, in writing, that the Registrar of Trusts ("Registrar") provide them with information which they need to exercise their duties under the following legislation: the Anti-Corruption Law (2019 Revision); the Monetary Authority Law (2018 Revision); the Proceeds of Crime Law (2019 Revision); or the Tax Information Authority Law (2017 Revision) ("Laws"). The Registrar must share that information within 48 hours of the written request. The body with which it is shared may only use the information for the purpose for which it was shared or provided, keep it for as long as is necessary to do so, and it must not disclose that information for any other purpose without the Registrar's prior consent.

Who can ask for information from Trustees?
A competent authority can direct trustees or any other person exercising effective control of a trust in contravention of any of the Laws to provide such information on the trust and its activities. If a trustee fails to do so then they commit an offence and are liable on summary conviction of CI$50,000 (US$60,974) or, if the offence continues, CI$10,000 (US$12,195) per day or part of a day, up to a maximum of CI$50,000 (US$60,974).

Changes to CIMA powers
The new legislation makes the following changes to the powers of the Cayman Islands Monetary Authority (CIMA):

• The definition of when CIMA has authority to take action where a corporate service provider has breached relevant legislation has been extended to include Part 8 of the Limited Liability Partnership Law, 2017 ("Part 8");
• Part 8 has been added to the list of laws breach of which CIMA can ask for a search warrant;
• CIMA search warrants will be authorised by a magistrate rather than a Justice of the Peace; and
• CIMA may require a licensee holding a licence to carry on banking business or a Cayman banking group to make public disclosures as CIMA may specify.