Cayman Islands AML Procedure Requirements
10 Mar 2018
We refer to our prior client updates on changes to the Cayman Islands AML regime:
The Anti-Money Laundering Regulations, 2017
New AML Regulations: Application to Insurance & Unregulated Investment Entities
Further Important Changes to the Cayman Islands AML Regime
If your Cayman Islands investment funds are registered with the Cayman Islands Monetary Authority ("CIMA"), they will have been subject to the Cayman Islands AML regime since their launch.
Pursuant to the revisions to the Anti-Money Laundering Regulations, 2017 ("AML Regulations") and the Guidance Notes on the Prevention and Detection of Money Laundering and Terrorist Financing in the Cayman Islands ("Guidance Notes"), certain mandatory procedures have been added.
Accordingly, we would recommend existing AML delegation arrangements (e.g. services delegated to the administrator) be reviewed to determine whether the current terms adequately address the new requirements. If applying the Cayman Islands AML regime, the Cayman fund's AML delegate should also be reviewing their own policies and procedures (maintained on behalf of, or relied upon by, the Cayman fund) to determine compliance with the new procedural requirements.
Outstanding Guidance Notes Issues
In our client update of 5 February 2018 (the "Update"), we addressed revisions to the Guidance Notes, and in particular, the questions on interpretation of: (i) whether a Money Laundering Reporting Officer still needs to be designated by an investment fund when it is delegating to or relying on their fund administrator (or other third party service providers); (ii) the requirement for an AML regime gap analysis when delegating AML / CFT functions to a non-Cayman Islands delegate, or relying on an eligible introduction for KYC purposes; and (iii) the use of simplified due diligence for remittances from an account in the name of the investor at regulated banks in approved jurisdictions.
Clients should note that our views on these questions, as set out in the Update, remain the same and, we understand, are shared by other Cayman Islands law firms who are active in the investment funds market. However, we understand (anecdotally as it has not been expressed in writing) that these views have not been specifically endorsed by CIMA.
The relevant Cayman Islands law firms have assisted Cayman Finance in setting out their views in writing to CIMA and have requested a meeting for the purposes of clarifying these outstanding points.
As noted in the Update, the CIMA administrative fines regime contains transitional provisions which expire on 15 March 2018, from which date CIMA would have the ability to impose fines for breaches of the Cayman Islands AML regime. CIMA has not issued guidance on how it intends to approach the implementation of the fines regime. In the circumstances clients need to be aware of the enforcement risk and should factor this into any commercial decisions.
If you would like further advice, or need to review existing or proposed arrangements, please contact your usual Maples and Calder lawyer or one of the individuals listed above.
Consultant Cayman Islands
T: +1 345 814 5471
Partner Cayman Islands
T: +1 345 814 5525