Preparing for a Cayman Islands Monetary Authority Inspection

Published: 1 Oct 2024

One of the most common ways in which CIMA assesses compliance with its regulatory framework is through inspections. CIMA conducts various forms of inspections ranging from AML-CFT specific inspections, prudential inspections and themed inspections.

CIMA’s themed inspections focus on specific topics such as corporate governance, cybersecurity and outsourcing, (as opposed to a specific sector e.g., banking, insurance). Feedback from CIMA’s themed inspections is generally published on CIMA’s website in the form of a report setting out the key themes identified, good practices and bad practices. Themed inspections are useful reminders of CIMA’s regulatory expectations on specific topics.

Primary Contact

Simon Raftopoulos

Managing Partner
Cayman Islands

T +1 345 814 2748
E [email protected]

Simon Raftopoulos, Miriam Smyth, Menelik Miller, Maree Martin

Legal basis

The extent of CIMA’s investigative powers vary, depending on the process being followed. In this briefing, we will focus on the powers afforded to CIMA under section 6(1)(b) of the Monetary Authority Act (as revised) and other related laws to carry out desk-based and on-site inspections.

During 2024, there was a notable increase in the number of inspections being carried out by CIMA across all divisions in particular within the Insurance Supervision Division and Securities Supervision Division. From working with clients across various regulated sectors, we see that trend continuing to evolve at pace for the remainder of 2024 and into 2025.

In this briefing we look at what to expect if you are subject to an inspection and how Appleby can help.

Key stage of a CIMA inspection

Save the date notification: every CIMA inspection starts with a written letter informing the financial service provider (FSP) or its appointed agent of the inspection of the subject matter, purpose and scope of the inspection. This is followed by a list of requested documentation to be provided to CIMA pre-inspection. CIMA will examine the inspected FSP’s policies & procedures, board minutes, internal/external audits reports to identify any gaps or weaknesses in that documentation.

If the FSP has questions regarding the requested information, they should seek clarification from CIMA or their usual Appleby contact.

Pre-inspection planning: once notified of the inspection, the FSP should start to put in place any mitigation activities to address any gaps by ensuring policies & procedures are up to date, records are maintained so they can be provided to CIMA at short notice etc.

Inspection phase: there will be an opening meeting introducing CIMA’s inspection team to the FSP’s team involved in the inspection. This kick off meeting marks the start of the inspection and may be followed by a series of meeting themes covering e.g., corporate governance, cybersecurity, outsourcing, IT systems and operational resilience.

CIMA’s inspections are conducted on a proportionate basis according to the nature, scale and complexity of the FSP’s activities. The principle of proportionality is covered in CIMA’s regulatory measures published on its website. FSPs should always apply the principle of proportionality to their own compliance framework.

During the inspection CIMA will interview staff to ask probing questions about the inspected areas and the inspected FSP’s processes and procedures. The aim of these interviews is to ensure that the processes the inspected FSP has in place are actually applied in practice.

Closing meeting: the aim of the closing meeting is to discuss the inspection with the inspected FSP. During the closing meeting CIMA will summarise the scope of the inspection and materials reviewed, highlight any issues or concerns and give the inspected firm an opportunity to provide feedback. Comprehensive notes of the closing meeting and any initial findings should be prepared. If it is anticipated that there will be a compliance issue identified or a divergence of analysis on a matter between CIMA and the FSP, the FSP may wish to obtain legal advice prior to the closing meeting. The closing meeting does not necessarily mean the end of a particular matter, as any identified material breaches may be referred to enforcement if not remediated within the prescribed timeline.

Post-inspection reporting phase: After CIMA has concluded the inspection, it will issue a draft report to the inspected FSP and share its findings. If there are findings to be remediated, these will be categorized depending on their severity and a response deadline will be provided. The inspected FSP will have the opportunity to provide feedback for CIMA to determine if any adjustments need to be made ahead of issuing the final report. Depending on the nature of the matters to be remediated, the FSP may wish to engage legal counsel to assist in preparing their written response to CIMA.

Enforcement

In recent years, administrative fines imposed by CIMA has significantly increased. CIMA’s enforcement regime allows CIMA to impose a fine on an FSP and/or an individual involved in managing a regulated firm, where it has reasonable grounds to suspect that a regulatory breach has been or is being committed. To date, CIMA has imposed eleven fines on regulated entities and individuals under its administrative fines regime.

Although CIMA does not publicly publish a list of enforcement priorities, core areas of focus for working with FSP clients appear to be (i) assessing the financial and operational resilience of FSPs; (ii) supervising compliance with AML-CFT obligations; (iii) compliance with and implementing financial sanctions measures; (iv) corporate governance & risk management and (v) outsourcing.

These areas should be of key importance for FSPs to focus on as any weaknesses or identified compliance gaps brought to CIMA’s attention during the course of an inspection may trigger an enforcement action.

It is also worth mentioning that CIMA continue to discuss with industry groups its strong cross-jurisdictional engagement and collaboration with overseas regulatory authorities, whereby CIMA constantly remind FSPs that communication channels between overseas regulators and CIMA are open.

Appleby’s Top risk mitigation tips.

The legal and regulatory landscape in which an FSP operates is constantly evolving and the obligations associated with complying with laws and regulations are increasing.

Here are our top tips to having a successful inspection:

Clarify the precise scope and / or theme of the inspection: at the outset, determine (i) the date and timeframe for the inspection process, (ii) whether the inspection will be a prudential or AML inspection, (iii) whether the inspection will be conducted via desktop / physical onsite visits or a combination of both, (iii) which personnel or facilities will be required to be made available to meet with or accommodate the CIMA inspection team, and (iv) any specific information or documentation needed and the deadlines for providing the same;

Engage with CIMA: be transparent and fully cooperative with CIMA and establish a good working relationship from the start to address any concerns CIMA might have. Nominate a point of contact in the firm to communicate with CIMA or else appoint Appleby to do this on your behalf;

Have well defined procedures/up to date records: ensure your firm has well defined procedures and all records are retained, where appropriate, and up to date. This ensures that you are prepared for a CIMA inspection when it happens. Don’t wait for CIMA to notify you of an inspection to get your house in order;

Don’t look for trouble: pay fees and file reports when due, respond to CIMA queries within the prescribed timeline;

Ensure good corporate governance: evidence to CIMA that the inspected FSP has an adequate and effective corporate governance framework in place based on the principle of proportionality;

Outsourcing: given the increased regulatory scrutiny by CIMA of outsourcing arrangements, ensure all outsourcing arrangements are governed by written agreements, adequately and continuously assessed and monitored and are governed by adequate and appropriate policies and procedures.; and

Document communications: ensure that the nominated point of contact and any other staff of the FSP document all in person and telephone communications, all emails sent to and received from CIMA and any other written correspondence.

We can help

It is recommended that compliance and risk assessment health checks are carried out to test systems, controls, policies and procedures to ensure that they are in line with all applicable laws, regulations and regulatory guidance. Our regulatory team has successfully guided numerous FSPs across various sectors through the CIMA inspection process. We have an excellent understanding of CIMA’s expectations and can:

provide support before the kickoff meeting by conducting an independent legal review of your compliance policies and procedures and by updating certain documentation to address any shortcomings before CIMA identifies them;
attend meetings during the inspection to address queries raised by CIMA;
provide written responses to CIMA queries; and
provide training before or following the inspection and assist with remediation measures.

More publications

JPLs, Directors and Arbitration: Grand Court Clarifies the Scope of Provisional Liquidators' Powers

5 Aug 2026

Good faith in action, not just belief: the UK Supreme Court’s decision in Saxon Woods Investments Limited v Costa and its significance in the Cayman Islands

May a company director depart from a strategy his board has agreed, in the sincere belief that he knows a better route to the company’s success? In Saxon Woods Investments Limited v Costa [2026] UKSC 21, the Supreme Court held that, whatever the answer, a director cannot pursue his own strategy by concealing it from, and misleading, his fellow directors. The Court confirmed that the good faith duty is not confined to a director’s sincerely held view of the company’s best interests; it also governs the means by which the director acts. The decision is an authoritative statement of the content of the fiduciary duty of loyalty, and is likely to be influential in the Cayman Islands. The decision will interest directors, those who advise or appoint them, and stakeholders affected by directors’ conduct.

Alan Bercow, Daniel Coelho

30 Jul 2026

Contingent Creditors, Standing And The Winding Up Jurisdiction: Analysing Re Petrosaudi International

The Cayman Islands Court of Appeal has delivered a highly significant judgment in Re PetroSaudi International.[1] The Court clarified the circumstances in which an alleged contingent creditor will have standing to petition to wind up a company under section 94(1)(b) of the Companies Act, and confirmed that there is no jurisdiction to make a winding up order on an ex parte without notice basis.[2] Our article analyses the Court of Appeal’s decision, and considers its implications for insolvency practitioners.

Harriet Ter-Berg, William Spence

30 Jul 2026

Final Means Final: Wei v Wang and the Common Law Enforcement of Foreign Judgments in the Cayman Islands

English Court Reaffirms Pro-Enforcement Approach to Foreign Judgments In Wei v Wang [2026] EWHC 1892 (Comm), the Court confirmed that exceptional avenues of review do not undermine the finality of a judgment and reiterated the limited scope of the natural justice defence.

Alan Bercow, Zuhair Farouki

28 Jul 2026

Drelle Overturned in Latest UK Supreme Court Decision

The United Kingdom Supreme Court in its recent decision in Drelle v Servis-Terminal LLC [2026] UKSC 29 (Drelle SC) has overturned the controversial decision of the English Court of Appeal in Servis-Terminal LLC v Drelle [2025] EWCA Civ 62 (Drelle CA), and in doing so has provided welcome clarity on the effect of unrecognised foreign judgments in cross-border bankruptcy and insolvency contexts. This is likely to have a wide-reaching impact – not only in the UK but also offshore – and particularly in the British Virgin Islands following the recent decision in JJW Hotels & Resorts Holding Inc v Rhodes (BVIHCM2025/0296) (JJW Hotels) (which relied heavily on Drelle CA), and in the Cayman Islands where previous authorities had recognised the ability, in the corporate context, for petitioners to present winding up petitions on the basis of an unrecognised foreign judgment.

Daniel Mitchell, Harriet Ter-Berg, Jae Shin

24 Jul 2026

Thalassa Investments LP: Section 22 and Specific Discovery - Strategic Considerations for Limited Partners Seeking Information and Documents

In Thalassa Investments LP [2026] CIGC (FSD) 32, the Grand Court refused an application by limited partner petitioners for specific discovery from the general partner in just and equitable proceedings to wind up a Cayman Islands ELP. The ruling was against the backdrop of serious lack of probity allegations made against the general partner by the petitioners. Notwithstanding those allegations, the Grand Court declined to make orders requiring discovery of various categories of documents to be used at trial. The ruling brings into focus the multiple routes potentially open to limited partners seeking information and/or documents from an ELP where there are allegations of mismanagement by the general partner. The limited partner may issue substantive proceedings (or, as in this case, present a just and equitable winding up petition) against the general partner and partnership, and then obtain documents through the usual discovery process. Alternatively, the limited partner may pursue its substantive right to true and full information under section 22 of the Exempted Limited Partnership Act first in order to help inform the bringing of a substantive claim, as was the approach in the Neoma (Abraaj) and the Port Fund litigation. Thalassa illustrates that the nature of the information sought, who holds it, and the legal basis on which disclosure is sought are all highly relevant to the outcome. The decision also highlights that section 22 and discovery serve different purposes, are governed by different legal tests and can produce different outcomes. The strategic question is not whether section 22 or the discovery process may be preferable in the abstract, but which legal framework best aligns with the limited partner’s objectives and the nature of the information sought.

Susan Fallan, Daniel Coelho, Hannah Oh

Appleby-Website-Insolvency-and-Restructuring-562x340

14 Jul 2026

Directors Cannot Delay Shareholder Votes: Cayman Court Limits Postponement Powers

Eliot Simpson, Ray Leung, Steven Yuen

Appleby-Website-Banking-and-Asset-Finance

13 Jul 2026

Guide to Loans & Secured Financing in the Cayman Islands 2026

This guide provides local insights into the legal and regulatory framework governing bank lending and finance. It covers key topics including bank loans versus debt securities, common forms of bank loan facilities, bridge financing, the roles of agents, trustees and lenders, and governing laws. It also examines the regulatory landscape, including capital, liquidity and disclosure requirements, the use of loan proceeds, cross-border lending, and interest rate and currency restrictions. In addition, the guide explores security interests and guarantees, the impact of fraudulent conveyance and similar doctrines on bank loan financing structures, intercreditor arrangements, loan terms and structures, and recent market developments.

Caroline Barton

Appleby-Website-Insolvency-and-Restructuring

9 Jul 2026

A Warning to Litigants Seeking Funding: English High Court Clarifies the Limits of Litigation Privilege

Important for Cayman litigants, funders and attorneys given the growing use of third-party funding in disputes.

Harriet Ter-Berg, Alan Bercow, Sofia Kranjec

8 Jul 2026

A Cautionary Tale in Interim Injunctive Relief: Lessons from Dixon v Seymour

In a recent judgment of Chief Justice Ramsay-Hale, the Cayman Grand Court provided guidance on the necessary components of an application for interim injunctive relief. The ruling illustrates how an ex parte application may fail to satisfy the American Cyanamid test when unsupported by proper evidence.

Alan Bercow, William Spence

7 Jul 2026

CIMA’s 2026 Reinsurance Thematic Review: Focus Points for Boards

The Cayman Islands Monetary Authority (CIMA) has published its 2026 Thematic Review of Reinsurance Companies (Thematic Review). This reflects fieldwork conducted by CIMA between mid-2025 and Q1 2026 at selected Class B(iii) and Class D licensed reinsurers. The focus being on compliance with the Insurance Act (as revised) and other applicable legislation, regulations, rules and statements of guidance as issued by CIMA centering around stress-testing, cash flow testing frameworks, capital and collateral adequacy management, and corporate governance. Corporate governance weaknesses account for 68% of all findings with the remaining 32% spread across stress-testing, cash flow testing capital and collateral adequacy. Notwithstanding these findings, CIMA has noted several good practices across all areas including, importantly, comprehensive risk management frameworks covering key risk areas and strong capital and collateral adequacy monitoring processes. With Cayman’s reinsurance sector having grown to an institutional scale, and over 110 licensed reinsurers writing in the order of US$30 billion in annual premiums against over US$100 billion in assets, this latest Thematic Review demonstrates development in CIMA’s supervisory expectations of Cayman’s licensed reinsurers. It represents a reflection of the jurisdiction’s increasingly sophisticated and maturing reinsurance market and reinforces that CIMA’s expectations align closely with the standards that onshore counterparty cedants, rating agencies and US state regulators already expect. We take this opportunity to review certain of the key findings alongside CIMA’s cross-sectoral 2026 Thematic Review on Outsourcing, note some of the good practices highlighted by CIMA and make some associated recommendations for Cayman reinsurers.