Risks of Banking in Cayman Islands: What You Need to Know

The risks of banking in the Cayman Islands are different for each client type. However, Cayman Islands risks include country related risks, bank related risks, and other banking nuances.

The risks of banking in the Cayman Islands range from how the country’s reputation can impact transactions to how choosing the wrong bank can make managing your accounts extremely difficult.

In this article, we’re going to help you navigate these risks and share several important factors you should consider before opening bank accounts here.

We will also be answering common questions that we receive from our members when considering opening accounts in the overseas jurisdiction of the Cayman Islands.

This article is part of our free series on banking in the Cayman Islands, which shares unique insights on account opening options for foreign non-residents, available banking services, and much more.

Feel free to use the table of contents to jump ahead to the sections most relevant to you.

Table of Contents

  1. Risks of Banking in the Cayman Islands
  2. Is It Safe to Bank in the Cayman Islands?
  3. Frequently Asked Questions
  4. Ready to Open an Offshore Bank Account?

Risks of Banking in the Cayman Islands

There are three main risk categories to consider before banking in the Cayman Islands, which are regulatory risks, reputation risks, and bank specific risks. We’ll discuss each of these risks and additional nuances in detail below.

Is It Safe to Bank in the Cayman Islands?

Yes, the Cayman Islands is safe for banking if you choose the right banks, and bankers, and maintain reasonable deposits that match your risk tolerance.

That said, like banking in any country, if you choose a bank that has poor management, irresponsible lending, and investing practices, and does not maintain adequate capital and liquidity ratios, it would not be considered “safe”.

These factors are important to consider, especially if you are looking to open an account with a low deposit, make frequent cross-border transfers, need to send money to the Cayman Islands, or are looking for remote account opening.

As mentioned, there are a few risk factors that you should consider before deciding on tapping into overseas account opening and offshore banking in the Cayman Islands. These risks include regulatory risk, reputation risk, and bank-specific risk. Each of these factors is explained in detail below.

1. Regulatory Risks of Banking in the Cayman Islands

The Cayman Islands are currently listed by the Financial Action Task Force (FATF) and the United Kingdom on their greylist and blacklist, respectively. This means that the jurisdiction is under increased monitoring for anti-money laundering purposes.

As a result of being listed by FATF and the UK, transactions to and from the Cayman Islands will likely face additional scrutiny. At the very least, this may involve enhanced due diligence, document requests, and delayed transactions. At worst, it can involve frozen and closed bank accounts and difficulties opening elsewhere.

Here is a look at the two regulatory bodies that currently list the Cayman Islands:

FATF Greylist

The Financial Action Task Force’s (FATF) list of jurisdictions under increased monitoring

UK Blacklist

United Kingdom’s list of high-risk third countries for AML purposes

2. Reputation of the Cayman Islands

Yes, the Cayman Islands does have a reputation problem. To people outside of the banking world, Cayman is seen as a jurisdiction that facilitates money laundering and has weak regulation. And, while this is not true when considering the current state of the Cayman Islands’ financial industry and regulatory environment, the stigma remains.

Unfortunately, this stigma can cause issues for individuals looking to open personal or business accounts or require high-value financial accounts or Cayman Islands private banking services. This is true when sending and receiving money to the Cayman, registering companies in the Cayman, or simply engaging in business with individuals from outside of the Cayman Islands. Needless to say, if you operate and bank in a country that is blacklisted, there is a reputational risk that can impact you, your entities, and your financial activities.

3. Bank-Specific Risks in the Cayman Islands

Not all the top financial organizations or the best banks in the Cayman Islands are created equal. This is a given. Certain banks are better managed, better capitalized, and worth considering over others. In the Cayman Islands, this is especially true when you are looking at banks that cater to foreign non-residents and foreign entities.

Importantly, other factors to consider beyond risk are the account opening deposits and Cayman Islands banking costs. Each bank has its fee structure, including account opening, maintenance, and activity fees. While not all banks here charge all of these fees, many do and you should compare directly before deciding where to open.

So, while the Cayman Islands is a relatively safe banking jurisdiction, the banks here may not be a suitable option for every client type. That said, if you are looking to open an account in the Cayman Islands Dollar (KYD), the currency of the Cayman Islands, there are options worth considering.

Of course, it’s important to confirm each bank’s requirements, fee structures, onboarding process, and the types of accounts and Cayman Islands banking services available to you before applying.

That said, unlike many jurisdictions, the roster of banking companies and the list of banks in the Cayman Islands do not have deposit insurance. So, while we don’t advocate relying on deposit insurance to protect your nest egg, we do also advocate taking a close look at a bank’s financials, understanding their key ratios, and determining whether or not you trust the bank to protect your money.

Additional Cayman Islands Nuances to Consider

In addition to risks, there are annoyances to banking in the Cayman Islands that you may want to consider before you consider depositing personal assets into a Cayman Islands personal bank account. The same goes for opening a business or private bank account.

In particular, you’ll need to prepare to pass an extensive due diligence process. For example, you’ll likely be required to provide proof of ties to the Cayman Islands, whether you’re opening a personal bank account, commercial asset account, or a Cayman Islands business bank account.

Of course, other factors come into play, such as document requests, deposit amounts, compliance requests, and more. That said, out of the prominent global institutions and the largest banks in the Cayman Islands, the ones that cater to foreign non-residents are often more understanding of international transactions and offshore business activities. So, if you can pass the initial onboarding process and the Cayman Islands banking requirements, opening an account here may still be worth exploring. In fact, when the right bank is chosen, there are plenty of financial incentives and benefits to banking in the Cayman Islands, which you can learn more about by clicking here and accessing our free guide.

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Frequently Asked Questions

Below are a few of the most common questions we receive from people looking to bank in the Cayman Islands. If you have further questions you would like answered, don’t hesitate to get in touch.

Is It Illegal to Have a Bank Account in the Cayman Islands?

No, it is not illegal to have a bank account in the Cayman Islands. In fact, the Cayman Islands is a popular banking jurisdiction for many foreign non-residents. In most cases, the only requirement is that you need to disclose your offshore account to the government in your country of tax residence (e.g. the United States). That said, not all banks in the Cayman Islands offer non-resident banking. However, if you have a suitable profile and you are willing to meet the deposit requirements, it is possible to open here.

Is My Money Safe in the Cayman Islands?

Generally speaking, your money is likely to be safe in the Cayman Islands. Of course, like banking anywhere outside of your country of residence, there are some risk factors to consider, including regulatory, currency control, reputation, and bank-specific risks. Fortunately, the Cayman Islands has a stable banking sector with sophisticated practitioners. However, the Cayman Islands does not offer deposit insurance, so if this is important to you, you may want to consider opening elsewhere.

Why Do People Put Money in Cayman Islands Banks?

There are many reasons why people put money in Cayman Islands Banks. For starters, the Cayman Islands is economically and politically stable, it has strict compliance regulations, banks here have experience in working with international clients, and it is a leading offshore banking center.

Ready to Open an Offshore Bank Account?

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GlobalBanks Team
GlobalBanks Team

The GlobalBanks editorial team comprises a group of subject-matter experts from across the banking world, including former bankers, analysts, investors, and entrepreneurs. All have in-depth knowledge and experience in various aspects of international banking. In particular, they have expertise in banking for foreigners, non-residents, and both foreign and offshore companies.

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