The Cayman Islands Monetary Authority or (CIMA)
Banking
The Banking Division of the Cayman Islands Monetary Authority
("CIMA") is responsible for processing applications
for banks, and banks and trust company licences, and for making
recommendations to the Governor-in-Council for the issue (or
non issue) of a licence. The division is responsible for both
off-site and on-site supervision of the banks, and bank and
trust companies.
licencees are required to provide the CIMA with annual audited
accounts and quarterly reporting schedules. These are examined
and analyzed by the division in order to assess capital adequacy,
asset quality, management capability and expertise, earnings
and liquidity. On-site supervision focuses on the risk management
practices of banks and enables CIMA to monitor and control
these risks.
CIMA aims to maintain a level of supervision which reflects the international supervisory standards.
Insurance
As with banking and trust company applications, the applications by insurance companies, insurance managers, brokers, agents or sub-agents are carefully considered and a recommendation made to the Governor-in-Council, Special attention is paid to the business plan, including the level of solvency to be maintained. Subsequent changes to the business plan must be agreed with the regulators.
Ongoing requirements include the filing of annual audited
financial statements along with a certificate of compliance.
One very important element in the administration of the insurance
industry is the role of the insurance managers. The Insurance
Law stipulates that every captive must appoint an insurance
manager resident in the Cayman Islands who are to be responsible
for maintaining proper records of its business. The insurance
manager is called upon to ensure the captives are complying
with the provisions of the Insurance Law and to maintain timely
communications with CIMA.
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Investment
The Investment Services Supervision is responsible for the supervision and regulation of mutual funds and mutual fund administrators. This division processes applications for mutual fund administrator licences and puts forward recommendations to the Governor-in-Council. Applications for the licensing or registration of mutual funds, which are subject to the CIMA's approval, are also processed by this division.
As with all other sectors, funds and administrators are required
to file audited financial statements, which are examined and
analyzed by the division. The Mutual Funds Law, however, places
some of the supervisory obligation in the hands of the private
sector, specifically the mutual fund administrators and external
auditors of funds and administrators have reporting obligations
to CIMA in certain circumstances.
Fiduciary Services
Fiduciary Services within CIMA are responsible for the supervision, regulation and guidance of all company managers and trust companies that do not have a banking licence or banking affiliation. This division of the monetary authority will be working closely with the banking division in the provision of technical support with regard to on-site inspection.
Compliance
The Compliance Division of the Cayman Islands Monetary Authority
is responsible for the centralization of the enforcement regime and due diligence of all the divisions of CIMA.
The work of this division is primarily in the areas of investigation
and analysis. One of the primary aims of the compliance division
is to expand the intelligence-gathering capability of CIMA and to improve its general supervisory capabilities. The Head
of Compliance acts as the central reporting officer for CIMA to the financial reporting unit regarding any suspicion of
money laundering identified in the course of the divisions
investigators.
In addition, the division is responsible for the dissemination
of documents and information in response to overseas requests.
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Inspections
CIMA adopted a strategic initiative to upgrade supervisory
capabilities to international best practice levels by implementing
on-site inspections in 1998. The on-site inspection represents
the fact-finding part of the supervisory function, which is
complemented by the analytical work of the off-site division.
On-site inspections are carried out for all of CIMA's licencees,
covering banks, trusts, insurance companies, company managers
and mutual funds.
A major objective of the inspection program is to gain a
thorough understanding of a financial service provider's operations,
the risks it faces and how these risks are managed. The inspection
reviews the roles performed by the board of directors and
senior management in establishing risk levels, and the internal
control mechanisms employed to monitor these risks. Risk categories
broadly relate to credit, market, liquidity, operational and
reputational risk.
On-site work includes a review and assessment of Lyle Institution's
Risk Management policies and procedures, control environment,
and compliance with laws, regulations and supervisory directives.
During the inspection, individual transactions are tested
to evaluate the effectiveness of the control environment.
Integral to the effective monitoring of internal controls
is an independent audit function. In order to avoid duplication
of effort, the inspection endeavors to rely on the work of
the internal auditors. As part of the inspection, a basis for reliance
upon the work of the internal auditor is established.
The inspection process relies on the work of the external
auditors with respect to the truth and fairness of the financial
statements. During an inspection, bilateral discussions are
held with the external auditors to review the strength of
the institution's risk management processes, internal controls,
compliance with legislation, and adequacy of loan loss provisions.
The overall inspection objectives are to:
- Understand the registrant's business activities and operating environment.
- Detect problems of compliance with the Law or regulations.
- Gather information on mailers identified as requiring policy consideration.
The inspections are intended to improve regulatory efficiency
and effectiveness. As a part of its supervisory functions,
CIMA is also responsible for international cooperation with
other regulatory bodies, namely to assist overseas regulatory
authorities in accordance with the Monetary Authority Law
(2003 Revision).
CIMA participates regularly in international regulatory forums
including the Committee Cross Border Working Group, Offshore
Group of Insurance Supervisors and the Caribbean Financial
Action Task Force (CFATF). These bodies engage in
discussions to:-
- Understand the registrant's business activities and operating environment.
- Detect problems of compliance with the Law or regulations.
- Gather information on matters identified as requiring policy consideration.
The inspections are intended to improve regulatory efficiency and effectiveness.
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