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By way of an update on our recent publication (which can be found here) that the Financial Action Task Force (FATF) had determined that the Cayman Islands has substantively fulfilled its action plan, and following completion of a recent on-site visit by the FATF, the Cayman Islands has now been de-listed from the FATF so-called “Grey list”.

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The FATF plenary congratulated the Cayman Islands for its significant progress in addressing the strategic AML/CFT deficiencies previously identified during its mutual evaluations. The Cayman Islands will no longer be subject to the FATF’s increased monitoring process.

With its removal from the FATF’s Grey list there is an expectation that the Cayman Islands will be de-listed from the EU’s AML / CFT List shortly.

The Cayman Islands has continued to be the premier offshore jurisdiction for, among other things, structuring investment funds and special purpose vehicles notwithstanding its inclusion on each of the FATF Grey list and the EU’s AML/CFT List. One of the key reasons for this is that the jurisdiction operates a business friendly and well-regulated financial system underpinned not only by a belief in proportionate, risk-based regulation and a conviction to integrity and transparency, but also by the belief that appropriate regulation and international cooperation drive commercial success.

The removal of the Cayman Islands from the Grey list will hopefully serve to underscore the jurisdiction’s drive to adopt the highest international standards and industry best practices.

Further Assistance

This publication is not intended to be a substitute for specific legal advice or a legal opinion. If you require further advice relating to the matters discussed in this Legal Update, please contact us. We would be delighted to assist.

E: gary.smith@loebsmith.com
E: robert.farrell@loebsmith.com
E. elizabeth.kenny@loebsmith.com
E: cesare.bandini@loebsmith.com
E: wendy.au@loebsmith.com
E: vivian.huang@loebsmith.com
E: faye.huang@loebsmith.com
E: yun.sheng@loebsmith.com

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We Won!! Many thanks indeed to our clients and peers who voted Loeb Smith the Best Law Firm: Fund Domicile at the US Emerging Manager Awards 2023 organized by Private Equity Wire.

Congratulations to our Investment Funds team for their top notch legal advice and for working seamlessly between our offices in the BVI, the Cayman Islands and Hong Kong!

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Introduction

We are pleased to announce our firm’s recognition on The ALB Fast 30 list which reinforces the firm’s growth strategy in Asia by providing high quality technical legal advice and commercial solutions, outstanding client services, and continuous drive to stay at the forefront of the fast-changing business and technological landscapes in Asia.

We value that ALB has adequately appreciated the rapid and robust growth of Loeb Smith in the past year. We appreciate the recognition alongside other law firms in the region and are proud to have achieved a steady growth across our jurisdictions and practice areas and look forward to upholding the Loeb Smith standards of excellence.

Loeb Smith Attorneys is one of the leading offshore corporate law firms considered one of the most active and knowledgeable firms for advising on offshore investment funds formation and launch of all asset classes including public securities, private equity, venture capital, real estate, and virtual assets. Other areas of strength and growth are advising on M&A, Finance, Corporate Restructurings, Capital Markets, Regulatory Compliance, Investments, Logistics, Shipping and Aviation.

Considered a leading law firm in the Fintech and Blockchain Technology space, Loeb Smith also advises on token issuances, application for VASP licences for Web 3.0 businesses, Metaverse infrastructure and other virtual asset service providers, and utilising Cayman and BVI structures to develop virtual asset platforms for DAOs. Loeb Smith’s clients are investment managers, financial institutions, onshore counsels, and HNWIs who the firm advises on day-to-day legal issues and complex, strategic matters.

Some of our firm’s recent accolades are: winning Leading Firm in Client Satisfaction 2024 award by Legal 500; ranked in Investment Funds category and listed as one of the Firms To Watch for Corporate & Commercial by Legal 500 in 2024; named as Recommended Firm by IFLR 1000 from 2021 to 2024; named in Offshore Client Choice List by Asian Legal Business from 2021 to 2023; ranked amongst Top 30 Asia’s Fastest Growing Law Firms by Asian Legal Business in 2023 and 2024; ranked in The A-List: Top Offshore Lawyers by Asia Business Law Journal in 2022 and 2024; named as one of the ALB Hong Kong Firms to Watch 2024; winning Best Law Firm – Fund Domicile at Hedgeweek US Emerging Manager Awards 2023 and 2024; winning Best Law Firm – Fund Domicile at Private Equity Wire US Emerging Manager Awards 2023 and 2024; winning Best Law Firm – Fund Domicile at Private Equity Wire US Awards 2023; and winning The Best Offshore Law Firm – Client Service at With Intelligence HFM Asia Services Awards 2024.

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On 31 August 2022, the Cayman Islands introduced the restructuring officer regime by making certain amendments to the Cayman Islands Companies Act. Please see link below to an article first published in IFC Review where Gary Smith and Robert Farrell consider the benefits of the Regime now that it has been in place for nearly twelve months, and how it is operating in practice. Cayman Islands:

The New Regime For Restructuring Officers.

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We are pleased to share that Loeb Smith Attorneys has won Best Law Firm – Fund Domicile at the Private Equity Wire US Awards!

It feels great to see that our team’s relentless determination for successful closures has been recognized multiple times this year, including for the second time at Private Equity Wire Awards 2023. For the service provider categories, the nominated firms were based on a widespread survey of more than 500 GPs and other key industry participants. Congratulations to our Investment Funds team for their top notch legal advice and for working seamlessly between our offices in the BVI, the Cayman Islands and Hong Kong!

We thank Private Equity Wire and the clients for their vote!

Find out more here: https://awards.privateequitywire.co.uk/us-awards

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Why and Where Do You Need to Be Offshore?
Wendy Au of Loeb Smith Hong Kong office shared her insight with SS&C Intralinks on what makes offshore destinations attractive to Asia-based fund managers with some key considerations and the different options available for fund domiciles.

Check out further at:

Why and Where Do You Need to Be Offshore? | Intralinks

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Good News

Following the conclusion of the FATF’s most recent plenary on 23 June 2023, the FATF has determined that the Cayman Islands has substantively fulfilled its action plan. Therefore, subject only to the completion of an on-site visit by the FATF later this year, which forms part of the FATF’s standard process for removing a jurisdiction from the Monitoring List, the Cayman Islands will be delisted. As the EU has previously confirmed that it does not require the Cayman Islands to take additional steps beyond those set out in the FATF’s action plan to facilitate removal from the EU AML List, it is widely expected that this will automatically follow. See more in our Article published in the Hong Kong Lawyer.

https://www.hk-lawyer.org/content/cayman-islands-satisfies-fatf-action-plan

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The Virtual Assets Service Providers Act 2022 (the “VASP Act”) was enacted in the British Virgin Islands (“BVI”) on 1 February 2023. It creates the legal framework for the registration and supervision of Virtual Assets Service Providers (“VASPs”) operating in and from within the BVI.

Through the provisions of the VASP Act, the BVI Financial Services Commission (the “BVI FSC”) is established as the competent authority for the supervision of persons engaging in any virtual assets service.

Summary

For those persons who have been carrying on a virtual asset service prior to the coming into force of the VASP Act on 1 February 2023, the VASP Act allows a transitioning period of 6 months (ending therefore on 31 July 2023) within which they can either (1) submit an application to the BVI FSC to be registered as VASPs or (2) cease their VASP- related operations altogether.

Who is a Virtual Asset Service Provider?

By way of recap, the VASP Act defines a VASP as a virtual asset service provider who provides, as a business, a virtual assets service and is registered under the VASP Act to conduct one or more of the following activities or operations for or on behalf of another person:

exchange between virtual assets and fiat currencies;
exchange between one or more forms of virtual assets;
transfer of virtual assets, where the transfer relates to conducting a transaction on behalf of another person that moves a virtual asset from one virtual asset address or account to another;
safekeeping or administration of virtual assets or instruments enabling control over virtual assets;
participation in, and provision of, financial services related to an issuer’s offer or sale of a virtual asset; or
perform such other activity or operation as may be specified in the VASP Act or as may be prescribed by regulations made by the BVI FSC in connection with the VASP Act.

A virtual asset is a digital representation of value that can be digitally traded or transferred, and can be used for payment or investment purposes, but specifically does not include the following:

digital representations of fiat currencies and other assets or matters specified in the guidelines which have been, and may in the future be, published in conjunction with the VASP Act; or
a digital record of a credit against a financial institution of fiat currency, securities or other financial assets that can be transferred digitally.

Services Expressly Caught by the VASP Act

The following services have been included in a non-exhaustive list of virtual assets services and are, as such, regulated by the VASP Act when carried out on behalf of another person:

hosting wallets or maintaining custody or control over another person’s virtual asset, wallet or private key;
providing financial services relating to the issuance, offer or sale of a virtual asset;
providing kiosks (such as automatic teller machines, bitcoin teller machines or vending machines) for the purpose of facilitating virtual assets activities through electronic terminals to enable the owner or operator of the kiosk to actively facilitate the exchange of virtual assets for fiat currency or other virtual assets; or
engaging in any other activity that, under issued guidelines, constitutes the carrying on of the business of providing virtual asset service or issuing virtual assets or being involved in virtual asset activity.

Services Specifically Excluded from the Application of the VASP Act

Rather helpfully, the VASP Act also sets out a non-exhaustive list of some of the services which are specifically excluded from its remit and these are as follows:

providing ancillary infrastructure to allow another person to offer a service, such as cloud data storage provider or integrity service provider responsible for verifying the accuracy of signatures;
providing service as a software developer or provider of un-hosted wallets whose function is only to develop or sell software or hardware;
solely creating or selling a software application or virtual asset platform;
providing ancillary services or products to a virtual asset network, including the provision of services like hardware wallet manufacturer or provider of un-hosted wallets, to the extent that such services do not extend to engaging in or actively facilitating as a business any of those services for or on behalf of another person;
solely engaging in the operation of a virtual asset network without engaging or facilitating any of the activities or operations of a VASP on behalf of customers;
providing closed-loop items that are non-transferable, non-exchangeable and which cannot be used for payment or investment purposes; and
accepting virtual assets as payment for good or services (such as the acceptance of virtual assets by a merchant when effecting the purchase of goods).

Registration Requirement and Timeline

Any person who wishes to carry on in or from within the BVI the business of providing a virtual asset service must be registered with the BVI FSC. For those persons, however, who have been carrying on a virtual asset service prior to the coming into force of the VASP Act on 1 February 2023, the VASP Act allows a transitioning period of 6 months (ending therefore on 31 July 2023) within which they can either submit an application to the BVI FSC to be registered as VASPs, migrate away from the BVI, or cease their VASP-related operations altogether.

As the transitional framework period for VASP registration expires on 31 July 2023 all VASPs operating from the BVI who have not yet applied for registration/licensing with the BVI FSC need to act NOW.

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Further Assistance

This publication is not intended to be a substitute for specific legal advice or a legal opinion. If you require further advice relating to the Virtual Assets Service Providers Act, please contact us. We would be delighted to assist.

E: gary.smith@loebsmith.com
E: robert.farrell@loebsmith.com
E: elizabeth.kenny@loebsmith.com
E: cesare.bandini@loebsmith.com
E: vivian.huang@loebsmith.com
E: faye.huang@loebsmith.com

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We are excited to announce that Loeb Smith has been shortlisted in two categories for the prestigious With Intelligence HFM Asian Services Awards:

With Intelligence HFM Asian Services Awards recognize and celebrate excellence in hedge fund services. The jury will announce the results at the ceremony taking place in Hong Kong on September 6, 2023, based on the following criteria:

Commercial success and business growth
Demonstration of product or service innovation
Description of future product or service development possibilities
Positive customer feedback via submitted testimonials

We would like to thank first of all our team in Hong Kong and across Cayman Islands and the BVI for their constant dedication, our clients in Asia for their support, and the HFM Asian Services jury members for this nomination!

This follows the recognition of Asian Legal Business’ Offshore Client Choice List 2023 for the third consecutive year as well as our Hong Kong Partner Peter Vas being awarded with ALB Hong Kong Rising Stars 2023.

For more information please visit https://hfmasiaservicesawards.com/hfmasianservicesawards2023/en/page/2023-shortlist

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Loeb Smith wins award for Best Law Firm: Fund Domicile at the Hedgeweek US Emerging Manager Awards 2023.

We are happy to share with you that for the second time in less than three (3) months Loeb Smith’s Investment Funds team has been voted Best Law Firm: Fund Domicile at the Hedgeweek US Emerging Manager Awards 2023.

The win comes after being voted Best Law Firm: Fund Domicile at the Private Equity Wire US Emerging Manager Awards 2023 in March 2023.

Thank you to each and every one of you who voted for us and congratulations to our Investment Funds team for the consistent high quality of its legal advice and responsive service delivery across our offices in the BVI, the Cayman Islands and Hong Kong.

For the service provider categories, the nominated firms are based on a widespread survey of more than 100 emerging hedge fund managers.

The exclusive awards ceremony took place on June 8, 2023 at the Convene 101 in New York.