Complying with the 2017 Cayman Islands Anti-Money Laundering Regulations - February 2018
On 2 October 2017 the Cayman Islands updated its Anti-Money Laundering Regulations in response to developments in international AML standards. The new regulations apply to all Cayman investment funds - previously exempt funds have until 30 September 2018 to comply.
Unregulated Investment Entities Now in Scope
The new regulations now apply to all persons carrying on relevant financial business (“RFB”), which means that unregulated investment entities (private equity) are now required to apply the same AML policies and procedures as regulated entities. The AML exemptions previously available for investors of unregulated funds have been withdrawn and these funds have until 30 September 2018 to comply with the new regulations.
Key Aspects of the New Regulations
The new rules increase the obligations placed on Cayman entities and also the sanctions for non-compliance.
- Increased obligations. The new regulations continue to require client identification and verification, record keeping, internal and external reporting, internal control and communication procedures and employee training. However funds must now also apply a risk-based approach, observe the list of countries which are non-compliant with FATF, adopt procedures to screen employees to ensure high standards when hiring, and designate a Money Laundering Reporting Officer (“MLRO”), Deputy Money Laundering Reporting Officer (“DMLRO”) and Anti-Money Laundering Compliance Officer (“AMLCO”). The MLRO, DMLRO and AMLCO must be natural persons of a managerial level. The AMLCO can also act as MLRO or DMLRO, but not as both – the MLRO and DMLRO must be different natural persons.
- Risk-based approach. The new regulations require RFBs to identify, assess, understand, document and monitor the money laundering and terrorist financing risks applicable to them in relation to their customers.
- Strengthened sanctions. Failure to comply will result in fines of up to CI$500,000 and, in some cases, imprisonment for two years.
How We Can Help
While the responsibility for ensuring compliance with the regulations rests with the investment entity, the law does allow the delegation of the AML functions provided the delegate is located in a country with equivalent legislation and the delegate itself is subject to the AML regime of that equivalent jurisdiction. Our experienced Cayman team of business professionals can assist Cayman funds in meeting their AML obligations by:
- Developing the policies and procedures required to enable client identification and reporting;
- Collecting and storing full client due diligence information;
- Risk rating all clients and carrying out additional due diligence on high risk parties;
- Screening clients against various OECD/FATF listings and international black list databases;
- Providing a MLRO, DMLRO and AMLCO; and
- Attending to reporting with the Cayman authorities as required.
To learn more about the new Regulations and how we may help please contact either:
- Elizabeth Heil in our New York office.
- Franciele Sgarioni in our Miami office.
We also recommend consulting with local Cayman counsel.