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Does holding offshore jurisdictions to higher AML standards really assist in preventing money laundering?

Andrew James Perkins (Department of Law, Truman Bodden Law School, Grand Cayman, Cayman Islands)

Journal of Money Laundering Control

ISSN: 1368-5201

Article publication date: 17 November 2021

Issue publication date: 31 October 2022

211

Abstract

Purpose

This paper aims to contend that when tackling financial crimes such as money laundering and terrorist financing, international regulators are seeking to hold offshore jurisdictions such as the Cayman Islands to higher standards and that this detracts from the pursuit of detecting and prosecuting money launders.

Design/methodology/approach

This paper will deal with the following perceived issues: firstly, to offshore jurisdictions as a concept; secondly, to outline the efforts made by the Cayman Islands to combat money laundering and to rate these changes against Financial Action Task Forces’ (FATAF’s) technical criteria; thirdly, to demonstrate that the Cayman Islands is among some of the world’s top jurisdictions for compliance with FATAF’s standards; and finally, to examine whether greylisting was necessary and to comment upon whether efforts by international regulators to hold offshore jurisdictions to higher standards detracts from the actual prosecution of money laundering within the jurisdiction.

Findings

Greylisting the Cayman Islands in these authors’ view was something that should have never happened; the Cayman Islands is being held to standards far beyond what is expected in an onshore jurisdiction. There is a need for harmonisation in respect of international anti money laundering rules and regulations to shift the tone to prosecution and investigation of offences rather than on rating jurisdictions technical compliance with procedural rules where states have a workable anti-money laundering (AML) regime.

Research limitations/implications

The implications of this research are to show that offshore jurisdictions are being held by FATAF and other international regulators to higher AML standards than their onshore counterparties.

Practical implications

The author hopes that this paper will begin the debate as to whether FATAF needs to give reasons as to why offshore jurisdictions are held to higher standards and whether it needs to begin to contemplate higher onshore standards.

Originality/value

This is an original piece of research evaluating the effect of FATAF's reporting on offshore jurisdictions with a case study involving primary and secondary data in relation to the Cayman Islands.

Keywords

Acknowledgements

This was not a funded piece of research. However author would like to thank Dr John Epp, Professor Amy Wallace, Ms Elaine Ward and Mr Xavian Ebanks for their comments on this piece. Any errors in drafting or of course author’s own.

Citation

Perkins, A.J. (2022), "Does holding offshore jurisdictions to higher AML standards really assist in preventing money laundering?", Journal of Money Laundering Control, Vol. 25 No. 4, pp. 742-756. https://doi.org/10.1108/JMLC-10-2021-0116

Publisher

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Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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