The Cayman Islands Anti-Money Laundering Regulations: How do these changes affect your funds?

Posted by Andrew Borowiec on Nov 7, 2018 4:03:00 PM

Cayman-Islands-Anti-Money-Laundering-RegulationsWith new anti-money laundering regulations coming into effect in the Cayman Islands last year, we thought it worth taking a look at what has changed and what is now required as the deadline for compliance has just passed.

New roles for every RFB

Every piece of relevant financial business (RFB), including registered and regulated funds, private equity, and investment managers (whether excluded or full) must have a named natural person appointed as the Anti-Money Laundering Compliance Officer (AMLCO), Money Laundering Reporting Officer (MLRO) and Deputy Money Laundering Reporting Officer (DMLRO).

One common question that arises is can these be the same person? The simple answer is that the AMLCO can be the same person as the MLRO or DMLRO but cannot occupy both of these secondary roles at the same time. This is because there always needs to be someone available for internal reports to be made to, so a minimum of two people should be appointed to the 3 roles per fund.

Every person occupying these roles will have certain things in common. They will be named with their contact details made available both internally to the employees of the fund administrator, and externally to both CIMA and other AMLCOs and MLROs as the need arises.

Policy, procedure and process changes

In addition to these new named roles, there are also requirements for changes to be implemented to the systems, policies, procedures and processes:

  • If the RFB is part of a group there is a requirement to:

    • Perform a gap analysis and implement a group-wide program which addresses money laundering and terrorist financing

    • Apply AML measures extraterritorially where the higher AML standard should prevail

    • Requirement for an independent compliance audit

  • Funds and fund administrators are also required to implement a risk-based assessment at service level and at client level, based around 4 main risk categories:

    • Customer/Client

    • Country/Geographical

    • Product/Services  

    • Delivery Channels

  • The final main area of change is around due diligence, with fund administrators and directors required to provide ongoing monitoring and updating of Customer Due Diligence processes. CIMA have also introduced two tiers of due diligence, simple and enhanced which we will explore in detail in a subsequent article.

CIMA Administrative Fines

As part of the new legislation, CIMA Administrative Fines are now higher and more comprehensive than ever with a list of offences and penalties being published. It is not yet clear how vigorously CIMA will apply these penalties.

CIMA now has new enforcement powers to impose substantial administrative fines on both individuals and entities licensed and regulated in the jurisdiction. This brings directors licensed or registered in the Cayman Islands within the scope of this regime, whether or not they are resident in the Cayman Islands.

Here are the categories and their associated penalties:

Breach Fines Limitation
Minor
Initial fine of $5,000 CIMA will also have a discretion to impose one or more additional finds of $5,000 each, up to a cumulative cap of $20,000 for a single minor breach
Six (6) months
Serious
A single fine up to a maximum of $50,000 for individuals or $100,000 for corporate bodies
Two (2) years
Very Serious
A single fine up to a maximum of $100,000 USD for individuals or $1 million for corporate bodies
Two (2) years


If you’d like to find out more about this critical topic, we advise spending half an hour listening to the webinar that inspired this article. Click on the button below to get started.

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Tags: Anti-Money Laundering (AML), Due Diligence

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