Leading law firm in dispute with CIG over BO rules

Walkers is suing the Ministry of Financial Services and the Registrar of Companies over information that law firms must provide on their clients to the authorities under the Companies Act. 

Walkers, one of the biggest law firms in the Cayman Islands catering to the offshore financial sector, filed a consent order on Friday to prevent the government from continuing or starting any action regarding more requests for information or fines under the law where identification has expired, against the backdrop of a full lawsuit filed last month.

In February, Walkers filed a suit asking the courts for a declaration that, on the proper construction of the relevant legislation, “the expiry or renewal from time to time of a passport, driver’s licence or other government-issued document for any ‘registrable person’ is not a ‘relevant change’ within the meaning of that section”.

The firm is seeking to prevent it from being fined over documents that are filed but have expired and have not yet been renewed, as they argue it is not a material change.

In the legal action, Walkers states that on 14 January it received over 500 separate letters from the registrar for its clients requesting information under the “relevant change” section of the Companies Act because the identification documents for these “registrable” people had expired.

The officials demanded details of correspondence with each person in respect of the expired IDs and any restriction notice issued in consequence and threatened administrative fines of CI$5,000 in the absence of a response within a stipulated time frame.

But the lawyers argue that the expiry or renewal from time to time of a passport, driver’s licence or other government-issued document is not a “relevant change” for the purposes of law and does not make the details of these registered individuals “materially incorrect or incomplete”, and that the registrar should not impose a fine until at least six months after they become aware of a breach.

The need for firms in the financial industry to supply the information arises out of the pressure Cayman has experienced from the Financial Action Task Force because of deficiencies in the country’s anti-money laundering regime. The Cayman Islands is required to have effective sanctions in cases where owners or their service providers don’t file up-to-date and truthful beneficial ownership information.