Key facts you need to know about the Cayman Island’s Anti-Money Laundering Regulations

31st May 2018 2147 - Blog Posts - Knowledge Library

The Cayman Islands is one of the jurisdictions of choice for global investors, but there have been numerous changes to the regulatory framework recently, particularly with regards to Cayman AML regulations. The new Anti-Money Laundering regulations came in to force in October 2017, but the Cayman Islands Monetary Authority (CIMA) issued updated guidance in December of last year.

This blog post presents an overview of the key changes that you need to know about the Cayman Islands Anti-Money Laundering regulations.

Cayman Island’s Anti-Money Laundering Regulations (2018 Revision)

Key Appointments that must be made

All Cayman domiciled funds will be required to appoint managerial individuals to act as Money Laundering Reporting Officer (MLRO), Deputy Money Laundering Reporting Officer (DMLRO) and Anti-Money Laundering Compliance Officer (AMLCO).

The same person can act as AMLCO and either DMLRO or MLRO, but the DMLRO and MLRO must be separate people.

The AMLCO must have AML oversight of an investment entity’s activities, and the role includes taking measures to develop AML and compliance systems and controls, reporting issues to the Board and dealing with mandatory reporting and enquiries from regulatory bodies. The DMLRO and MLRO will be the key points of contact for reporting suspicious activity, and they will take responsibility for reporting such activity to the relevant regulatory authorities. These roles can be fulfilled by directors of the fund or employees of the investment manager, administrator or service providers but they must be named and designated individuals with the appropriate knowledge, expertise and autonomy to carry out the function.

For existing registered entities in the Cayman Islands, these appointments must be in place, and filed with CIMA, by 30 September 2018. Any new entity that is registered on or after 1 June 2018, must provide the names of the appointed individuals when its registration application is submitted.

Gap Analysis for Outsourcing to Equivalent Jurisdictions

It is not unusual for AML to be outsourced to service providers outside the Cayman Islands. When Anti-Money Laundering is outsourced to a regulated service provider in an approved country, the updated guidance requires that entities can demonstrate the suitability of that country’s AML regime.

Although the AML Steering Group maintains a list – the AMLSG list – of jurisdictions that have a broadly equivalent AML regime, even if a service provider is based in a country on this list, funds are still expected to perform a gap analysis. The gap analysis does not have to compare the two AML regimes line-by-line, but it does have to prove an equivalence of outcomes. For example, if a situation would call for a suspicious activity report to be filed under Cayman Islands AML regulations but not under the foreign AML regime, that regime would not pass the gap analysis test.

CIMA is particularly concerned with ensuring that suspicious activity reports reach the Financial Reporting Authority in the Cayman Islands, even when MLROs and DMLROs are based in another jurisdiction.

Unregulated Investment Entities

Unregulated investment entities should also appoint a MLRO, DMLRO and AMLCO by 30 September 2018. While there is currently no stipulated notification procedure for unregulated entities, the appointments must be in place by this deadline. Sector specific guidance is currently being developed by CIMA, in conjunction with industry representatives, and is expected to be released shortly.

This is just an overview of the new framework that is coming into force in the Cayman Islands, with regards to AML. Lawson Conner are global compliance experts who have helped high-profile clients all over the globe to cut costs and risks by as much as 50-70% with our managed compliance solutions and technology. For advice and to find out more about the outsourced Cayman MLRO services, please read more here.