Cayman Islands: Record-Keeping Obligations of Trustees
In August 2019, the Cayman Islands Trusts Law was amended by The Trusts (Amendment) (No.2) Law, 2019 (the “Amendment”) under which record-keeping obligations of trustees were codified. The Trusts (Transparency) Regulations, 2019 (the “Regulations”) were published shortly thereafter by Cabinet in support of the Amendment. The Amendment and the Regulations apply to trustees of Cayman Islands trusts wherever the trustee is located.
The Regulations specifically require a trustee to keep and maintain current copies of the trust deed or documents recording the terms of the trust including any variations to the trust. The trustee must maintain the name and addresses of (i) the trustee; (ii) the settlor; (iii) any contributor to the trust; (iv) any specifically named beneficiary; (v) any identifiable class of beneficiary; (vi) the protector; and (vii) the enforcer.
Trustees are further required to take reasonable steps to ensure that an accurate and adequate record of the information required to be kept under the Regulations is:-
- easily accessible;
- in legible form;
- in the English language;
- kept updated;
- made available to a competent authority within forty-eight hours of a request in writing by it; and
- retained for a period of at least five years after the trustee ceases to be a trustee of the trust.
Under the Amendment, the competent authorities include local law enforcement and financial services regulatory agencies such as the Cayman Islands Monetary Authority, the Financial Reporting Authority, and the Tax Information Authority.
The Regulations provide that a trustee who, without reasonable excuse, fails to comply with the same commits an offence and is liable on summary conviction to a fine of five thousand dollars.
Under the Amendment, a trustee must also maintain accounting records relating to the trust and an accurate record of the identity and particulars of (i) service providers (including investment advisers, managers, accountants or tax advisors); and (ii) the person exercising ultimate effective control of the trust.
Where a competent authority believes a trustee or person exercising ultimate effective control over a trust is carrying on business in contravention of:-
- 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)
Such authority may direct that person to provide such information in relation to the trust or it activities as may be required by the competent authority. Failure to comply is an offence and can lead to a fine of CI$50,000 and to a further fine of CI$10,000 for each day that such offence continues, up to a maximum of CI$50,000.
It is expected that trustees would be in a position to meet the requirements of the Amendment and Regulations once in effect given their general duties as trustees in addition to their obligations under existing legislation. Nonetheless, given the significant fines that have been introduced and the short time frame within which one must respond to a request by a competent authority, all trustees would be wise to review their current record keeping procedures to ensure they are in a position to respond as required.
About the Author
Wendy Stenning is a senior associate in the firm’s private client and wealth management group in the Cayman Islands. She has significant experience advising trust companies and high net worth individuals on the establishment and ongoing administration of a variety of trusts.
The information contained in this article is provided for the general interest of our readers, but is not intended to constitute legal advice. Clients and the general public are encouraged to seek specific advice on matters of concern. This article can in no way serve as a substitute in such cases. Copyright ©2020 Higgs & Johnson. All rights reserved.