The Cayman Islands has further amended its anti-money laundering (AML) guidance, effectively broadening the scope of entities that are subject to the Cayman Islands’ AML laws and regulations. The amended guidance now sets out the conditions in which financial service providers (FSPs), including Cayman Islands investment entities, can rely on a third party service provider to perform some of their AML and compliance functions, or delegate performance of those functions to a third party.
The different requirements for FSPs to consider and implement when deciding whether to rely on a third party service provider to perform some of an FSP’s AML and compliance functions and or delegate performance of those functions to a third party.
According to the guidance issued there is a clear difference between ‘delegation’ and ‘reliance’: A ‘delegate’ performs the compliance function in accordance with the internal policies and procedures of the FSP, and not those of the delegate. The delegate would then be subject to the control of the FSP in ensuring the correct and effective implementation of those policies and procedures.
In a ‘reliance’ scenario, the person on whom reliance is being placed would perform the relevant function in accordance with that service provider’s own policies and procedures. The FSP must be satisfied that those policies and procedures will enable it to comply with the requirements of the Cayman AML/CFT regime in order to rely upon them, as explained by Mourant law firm.
The new rules also address the need for natural persons appointed as money laundering reporting officers and deputy money laundering reporting officers to be independent, autonomous, have sufficient time to perform their duties and access to all relevant material to perform their role, as Harneys points out.
This change means that all regulated funds – those registered or licensed with the Cayman Islands Monetary Authority (CIMA) – as well as unregulated investment entities, such as private equity, venture capital and real estate funds, are caught in the AML regulatory net.
The guidance also confirms that clients’ identities need not be verified at the time of receipt of bank transfers, in low risk scenarios when payment is from an account in the client’s name at a licensed bank in the Cayman Islands or an equivalent jurisdiction.
The deadline for regulated funds to notify CIMA of the appointment of an Anti-Money Laundering Compliance Officer, Money Laundering Reporting Officer and Deputy Money Laundering Reporting Officer as required under the AML Regulations is 31 December 2018.