The Cayman Islands Monetary Authority (CIMA) has recently published the findings of its 2025 Thematic Review on Outsourcing, assessing how sixteen cross-sector regulated entities (“Regulated Entities“) manage their outsourcing arrangements. The review evaluated governance structures, risk assessment practices, and oversight controls against CIMA’s Statement of Guidance on Outsourcing (April 2023), reinforcing the principle that outsourcing does not diminish regulatory responsibility.
The review revealed that outsourcing agreements and accountability represent the most significant areas of weakness, accounting for 34% and 33% of findings respectively. Common deficiencies in outsourcing agreements included missing provisions for performance monitoring, conflicts of interest, supervisory access, regular reviews, and insurance coverage requirements. On the accountability front, 22% of weaknesses related to insufficient board review of policies and procedures, with firms often unable to evidence annual review and approval processes.
Risk management weaknesses represented 10% of findings, with 36% of these relating to incomplete risk assessments that failed to consider country, strategic, and exit risks. Additionally, many entities did not conduct due diligence assessments prior to initiating outsourcing arrangements or on a regular basis thereafter.
CIMA identified several best practices that regulated entities should follow:
Governance and accountability: Regular board review and approval of outsourcing policies at least annually, board approval of material arrangements, independent compliance audits, and maintaining a centralised log of all material outsourcing arrangements.
Risk management: Establishing adequate frameworks to assess, control and monitor material outsourcing arrangements; performing risk, materiality and due diligence assessments before entering agreements and at least annually thereafter; and maintaining feasible contingency plans in case arrangements fail.
Outsourcing agreements: Ensuring agreements are duly signed and legally binding, with provisions covering scope of services, rights, responsibilities and fees; regulatory compliance obligations; regular reviews and reporting; insurance coverage; data breach notification; confidentiality clauses; and dispute resolution mechanisms.
Additional requirements: Establishing conflicts of interest policies with annual declarations from service providers; ensuring intra-group arrangements have fully executed written agreements with monitoring and oversight policies; and notifying CIMA promptly of any new or terminated outsourcing arrangements.
The Maples Group has extensive experience in advising Regulated Entities on their various regulatory compliance obligations. Please reach out to your usual Maples’ contact if we can be of assistance.
