The anti-money laundering regime (‘AML Regime’) in the Cayman Islands (‘Cayman’) has been updated and its scope widened, introducing a risk-based regime with enhanced due diligence requirements. Here we look at some of the important changes.
Does the new AML Regime apply to me?
The new AML Regime applies to Cayman domiciled entities (‘Financial Service Providers’ or ‘FSPs’) which conduct ‘relevant financial business ’. That definition has been revised and expanded to include ‘otherwise investing, administering or managing funds or money on behalf of other persons’ and ‘underwriting and placement of life insurance and other investment related insurance’ and now extends to include the following:
- • regulated investment funds registered with the Cayman Islands Monetary Authority (‘CIMA’);
- • investment funds, both open-ended and closed-ended, which are not registered with CIMA, such as exempted open-ended funds, private equity funds and venture capital funds;
- • insurance managers, insurance agents or insurance brokers in relation to long-term business; and
- • other entities which conduct ‘relevant financial business’ such as management vehicles (even if registered as an Excluded Person with CIMA), General Partners (‘GPs’) of investment funds and fund trading subsidiaries.
FSPs which conduct ‘relevant financial business’ must comply with the new AML Regime. This includes the requirement to appoint natural persons to the position of Money Laundering Reporting Officer (‘MLRO’), Deputy Money Laundering Reporting Officer (‘DMLRO’) and Anti- Money Laundering Compliance Officer (‘AMLCO’). One person may act as both MLRO and AMLCO but the positions of MLRO and DMLRO must be occupied by different persons. Other requirements include maintenance of client identification and verification procedures (using a risk based approach), internal reporting procedures and, where appropriate, staff training in AML.
What are the roles of MLRO, DMLRO and AMLCO and who can act in those positions?
- MLRO - The MLRO is to act as the point of contact for all suspicious activity reports (‘SARs’) and to report suspicious activities to the relevant authorities in Cayman. The MLRO should be employed at managerial level and should be well versed in the different types of transactions handled by the vehicle which may give rise to opportunities for money laundering or terrorist financing, reporting on any suspicious activity to the relevant authorities in Cayman as necessary.
- DMLRO - The DMLRO acts as the alternate to the MLRO and who shall in the absence of the MLRO discharge the functions of the MLRO.
- AMLCO - The AMLCO acts as the point of contact with the relevant authorities in the Cayman and is responsible for ensuring compliance with the AML Regime. This includes developing and maintaining AML systems and controls, conducting regular audits of the AML programme, maintaining relevant logs, reporting to the FSP’s board of directors (or equivalent) on material compliance issues and AML systems and controls, and responding promptly to requests for information by the relevant authorities.
- The AMLCO must have sufficient skills and experience, sufficient seniority and authority so that the FSP’s board of directors (or equivalent) react to and act upon any recommendation made, report directly to the FSP’s board (or equivalent) and have sufficient resources, time and staff.
- Delegation - The functions of MLRO, DMLRO and AMLCO may be delegated to service providers subsequently to the appointment of natural persons to those positions. For example, in the case of an FSP operating as an investment fund, the FSP’s administrator, if any, may be prepared to offer members of its team to be nominated to such positions as well as perform the delegated functions.
What are the deadlines involved?
All FSPs must designate and appoint an MLRO, DMLRO and AMLCO and be able to demonstrate to CIMA their compliance with such requirements, by the submission of the requisite information via CIMA’s REEFS portal on or before September 30, 2018.
For FSPs registering on or after June 1, 2018, such compliance must be demonstrated by the provision of the requisite information at the time of the submission of the registration application via CIMA’s REEFS portal. Accordingly, FSPs should make arrangements to comply with these changes as soon as possible.
What are the implications for non-compliance?
CIMA has the power to fine for non-compliance. Accordingly, we recommend that clients ensure that they are compliant with the new AML Regime in a timely manner.
Although Solomon Harris is not currently offering the services of MLRO, DMLRO or AMLCO, we can refer clients to relevant service providers who are offering such services. If you would like any further information on Cayman AML legislation then contact your usual contact at Solomon Harris or Richard Addlestone at or Nick Reid.
The information contained in this note is necessarily brief and general in nature and does not constitute legal advice. Appropriate legal or other professional advice should be sought for any specific matter.