The Cayman Islands has established a new regulatory authority, the Legal Services Supervisory Authority (LSSA), to oversee anti-money laundering (AML) compliance in its legal services sector. Officially announced in September 2025 by the Cayman Islands Legal Services Council and the Chief Justice Margaret Ramsay-Hale, this move represents a significant enhancement in the jurisdiction’s regulatory framework aimed at safeguarding its legal sector from financial crimes such as money laundering, terrorist financing, and proliferation financing.
Background and Purpose of LSSA Establishment
The LSSA has been created as the designated AML supervisory authority specifically for attorneys-at-law in the Cayman Islands, taking over responsibilities formerly managed by the Cayman Attorneys Regulation Authority (CARA). This transition follows legislative amendments to the Legal Services Act, the Proceeds of Crime Act, and the Anti-Money Laundering Regulations of 2025, along with recommendations from global bodies like the Financial Action Task Force (FATF) and the Caribbean Financial Action Task Force (CFATF) which provided international regulatory standards.
The authority’s main mission is to lead, strengthen, and safeguard the legal services sector against financial crimes. This entails ensuring that lawyers and law firms complying with relevant financial business (RFB) obligations implement robust AML, counter-terrorist financing (CTF), counter-proliferation financing (CPF), and sanctions evasion frameworks. By doing so, the LSSA aims to detect, prevent, and hold accountable those involved in illicit financial activities, maintaining Cayman’s reputation as a credible and well-regulated financial center.
Governance and Regulatory Scope
Governed by an independent Board of Directors, the LSSA operates under delegated authority from the Legal Services Council. This governance structure ensures strategic oversight and operational integrity while promoting transparency and accountability within the sector. The authority oversees all law firms and sole practitioners engaging in or assisting with financial business in or from the Cayman Islands, mandating registration and ongoing monitoring of compliance under a risk-based supervision approach.
Among its key responsibilities, the LSSA:
- Maintains a comprehensive register of all firms and practitioners under its supervision.
- Conducts monitoring and enforcement to ensure compliance with AML regulations.
- Issues guidance, directives, and procedures to assist legal professionals in meeting their regulatory obligations.
- Has enforcement powers including fines and penalties for breaches, continuing the precedent set by CARA.
Transition and Stakeholder Engagement
The transition to the LSSA from CARA has been seen as a critical step towards streamlining AML oversight within the legal sphere. The Cayman Islands Legal Practitioners Association (CILPA) has welcomed the change, recognizing the commitment and leadership shown by CARA in past years and expressing confidence in the LSSA’s ability to lead the sector forward. The government of the Cayman Islands has also supported the transition, highlighting the importance of maintaining the integrity of the jurisdiction in an increasingly complex global compliance environment.
Legal practitioners are being contacted by the LSSA to register anew if not already done under CARA, ensuring that all relevant businesses comply with the updated legal framework. This registration is mandatory for lawyers conducting relevant financial business activities such as managing client funds, undertaking client onboarding, and performing due diligence processes—all of which are critical within AML compliance standards.
Context within Cayman’s Broader AML Framework
The creation of the LSSA fits within a broader effort by the Cayman Islands to enhance its AML and counter-terrorism financing framework, which has undergone continuous reform since the 2018 revision of AML legislation. These reforms align local laws with international standards and emphasize appointing compliance officers and establishing clear roles and responsibilities within regulated entities, including law firms, funds, and financial service providers.
The LSSA complements oversight provided by other regulatory bodies, such as the Cayman Islands Monetary Authority (CIMA), which supervises the financial services sector at large, ensuring coordinated anti-financial crime efforts across multiple domains in the jurisdiction.
Importance for the Legal and Financial Sectors
Legal professionals in the Cayman Islands play a pivotal role as gatekeepers in preventing illicit financial flows. Ensuring their strict adherence to AML regulations is critical for protecting the integrity of the territory’s financial system. The LSSA provides the necessary regulatory focus and enforcement mechanism to uphold these responsibilities effectively. By doing so, it helps maintain international confidence in the Cayman Islands as a leading offshore legal services hub while protecting it against reputational risks linked to financial crime.
The establishment of the Legal Services Supervisory Authority marks a major milestone in strengthening the Cayman Islands’ anti-money laundering regime within its legal services sector. Through robust supervision, enforcement powers, and a clear regulatory mandate, the LSSA enhances the territory’s ability to combat money laundering, terrorist financing, and related financial crimes. This evolution in oversight reflects the Cayman Islands’ ongoing commitment to meeting and exceeding international compliance standards and promoting a transparent, well-regulated legal environment.