Important changes for Cayman Islands Investment Funds – AML Regulations

Important changes for Cayman Islands Investment Funds – AML Regulations

May 2018

The Cayman Islands has recently made changes to its Anti-Money Laundering (AML) regime. The Anti-Money Laundering Regulations, 2017 (AMLRs) came into force in the Cayman Islands in October 2017, replacing the Money Laundering Regulations (2015 Revision) (MLRs).

Responding to queries raised by the industry in the related Guidance Notes, CIMA has clarified that under the new AMLRs, regulated and unregulated investment funds must appoint natural persons in the required roles of Anti-Money Laundering Compliance Officer (AMLCO), Money Laundering Reporting Officer (MLRO), and Deputy Money Laundering Reporting Officer (DMLRO).

Scope of coverage

For new Funds, this requirement must be fulfilled by 1 June 2018, and for existing Funds, by 30 September 2018.

How it could affect you

Cayman Islands Monetary Authority (CIMA) regulated Funds must file the names of the AMLCO, MLRO, and DMLRO via the CIMA Regulatory Enhanced Electronic Forms Submission (REEFS) system. Unregulated entities should prove their compliance with the AMLRs via a valid contract with a relevant service provider for the required appointments.

Any person who contravenes the AMLRs commits an offence and is liable on conviction to a fine of up to US$609,756 (previously US$6097.56 under the MLR) or a fine and imprisonment for two years.

Roles and responsibilities

The MLRO role is a management level role with substantial responsibilities. The DMLRO role should be an individual of similar status and experience to the MLRO. The responsibilities of the MLRO and the DMLRO include, but are not limited to, assessing suspicious activity reports in relation to money laundering or terrorist financing activities, and determining whether to report these activities to the Cayman Islands Financial Reporting Authority (FRA).

The AMLCO is to maintain oversight of the compliance function. An independent reporting line must be maintained and the AMLCO should have full autonomy.

The aforementioned roles and compliance function can be outsourced to a service provider which is regulated for AML purposes in a recognised jurisdiction with equivalent standards to the AMLRs. A natural person may act in one or more of these roles, with the exception of the DMLRO role which cannot be held by the same natural person who is the MLRO.

Potential service providers may include the Fund’s:

  • Administrator
  • Investment Manager (e.g. Compliance Officer)
  • Director (i.e. Investment Manager appointed directors and or independent directors)
  • Other service providers (e.g. Compliance specialists)

How Vistra can support

We will support and guide you through the new regulations. If you have any questions or need advice on the changes of the AML regime, please contact your usual Vistra representative or email [email protected].