In September 2017, the law changed in the Cayman Islands, requiring all financial bodies (including funds) to appoint an anti-money laundering compliance officer (AMLCO) and banks, funds and other financial bodies were given a year in which to seek out and appoint an appropriate person.
In this article, we provide a quick reference checklist to reassure you that you have made or received the correct appointment, or alternatively guide you to making a better selection in future.
An AMLCO or MLRO has to be a natural person not a company
Under the new legislation, an AMLCO, MLRO or DMLRO has to be a natural person and not a company or other named structure. This is an absolutely critical, essential first step because the regulatory bodies, fund administrator staff and other AMLCO/MLROs have to know who they can connect with to discuss any issues of concern that have or should be reported.
Not only should the person be a natural person, their identity and contact details should be easily available to all the groups outlined above. In addition, you may wish to consider locating them close to or in the Cayman Islands, as the regulatory authorities there only accept reports by fax or in person.
Should the AMLCO be an internal appointment or external?
The choice of an internal vs. external natural person for the role of AMLCO is one that’ll have to be made by your particular institution. Some people prefer to keep everything in-house to facilitate the required “unfettered access” to all files, whereas some consider that independence is best maintained by the appointment of someone external to the fund administrator’s own organization. The regulators themselves have given no indication of a preference.
What else do we look for in an AMLCO?
- Local Knowledge: Your AMLCO must have solid and comprehensive knowledge of local legislation and regulations. In addition, they must be confident in their ability to apply this knowledge appropriately.
- Industry Knowledge: As you’ll be well aware, funds and banks are very different animals. But both are required to have an AMLCO, so simply being a whizz on anti-money laundering law isn’t enough. Your AMLCO needs to understand specifically how it applies to funds and fund administrators, which is very different to other organizations e.g. funds having no employees, but the same clauses that apply to bank employees being transferred to staff of the fund administrator.
- Awareness: The person you appoint as AMLCO must have a serious and considered appreciation of the risks involved with the appointment and knowledge of their responsibilities.
- Accessibility: Your AMLCO will have quite a high profile on a number of levels, they must have easy access to local competent authorities and be easily accessible in turn for those competent authorities. They must also have access to the board of directors and be known and accessible to all staff at the fund administrator.
- Experience: It almost goes without saying that the AMLCO must have serious years of experience in the AML/CTF profession. Experience that has been supplemented with ongoing professional development and learning to keep their knowledge current.
- Independence: An AMLCO must be able to demonstrate their independence, so that there is no conflict of interests between their “day job” and their appointment as AMLCO.
- Influence: An AMLCO may experience bullying, attempts from directors to divert them from reporting, questioning their decisions and otherwise seeking to either obstruct or undermine their efforts. They need to have the seniority and confidence to stand by and execute their decisions even in the face of this.
- Insurance: Due to the risks associated with the role, it is essential that the AMLCO has adequate professional indemnity insurance. For more information on this, see Statement of Guidance on Corporate Governance for Funds.
If you’ve found this article on selecting the right person for the role of the AMLCO interesting, why not check out the free online workshop recording that inspired it? In just 20 minutes you’ll learn everything you need to know about the new legislation, what the responsibilities of the AMLCO, MLRO and DMLRO are and what criteria you should use when appointing them. Press the button below to get started.