The on-going industry consultation with the Cayman Islands Monetary Authority (CIMA) has resulted in further clarification in respect of the Anti-Money Laundering Regulations (2018 Revision) (AML Regulations) and the Guidance Notes issued in December 2017. This clarification has been issued in the form of the Guidance Notes (Amendment) 2018 (Amendment).
The Amendment will not impact the appointments, policies and procedures Ogier has assisted its funds clients with in connection with the recent appointments of Anti-Money Laundering Officers for the 30 September 2018 deadline.
The key areas of clarification provided by the Amendment are as follows:
- An explanation of the distinction between "reliance on" an outsourced party and "delegation to" an outsourced party with respect to performance of functions required under the AML Regulations. In particular, reliance is the process by which the person relied upon applies its own policies and procedures, upon which the financial services provider relies; delegation, generally, refers to circumstances where a financial services provider adopts its own policies and procedures but delegates to the delegate authority to implement those. Reliance is the more common approach adopted by Cayman Islands funds, which typically rely on their administrator to perform certain of the required anti-money laundering functions.
- Details of the steps to be taken before a financial services provider (such as a fund or administrator) enters into a reliance arrangement. These steps include the need to undertake and document a risk assessment of the person upon whom reliance is being placed. Such risk assessment must include a consideration of the country risk. For example, such risk assessment may consider if the person relied upon is established in, and is subject to regulation in, a country contained on the list maintained by the Cayman Islands Anti-Money Laundering Steering Committee (AMLSG List Country); a positive confirmation, generally, will be a useful indicator of suitability to rely.
- There is no longer any express reference to the need to conduct a gap analysis if the person relied upon operates outside of the Cayman Islands. Instead, only where reliance is being placed on a person operating from a country where the relevant standards are lower when compared to the Cayman Islands would the person relied upon need to adopt the Cayman Islands standards. By way of reminder, at a meeting attended by Ogier with CIMA in April of this year, CIMA confirmed that, in any consideration of the standards being applied, there is no requirement to conduct a line by line comparison of each provision of the AML Regulations against the laws applicable in the foreign jurisdiction; rather, there is a requirement as to equivalence of outcomes. The Amendment has not expressly varied this position.
- The Amendment clarifies that Regulation 23 of the AML Regulations (which relates to, inter alia, situations where wire payments are made from banks in an AMLSG List Country) is a mechanism by which verification of the identity of a customer/applicant may not be required in certain low risk scenarios at the time of receipt of payment. However, the verification of identity must be conducted in accordance with the AML Regulations and Guidance Notes before the payment of any proceeds (such as redemption proceeds or dividends) is made back to the customer.
The Guidance Notes (Amendment) 2018 can be accessed here.
Reminder: upcoming 31 December deadline
By way of reminder, 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; although appointments should have been made by 30 September 2018.
Unregulated funds are reminded that they also have an obligation to appoint AML Officers and should have these appointments in place by 31 December 2018. However, unregulated funds are not at this point required to confirm such appointments to CIMA.
Please speak to your usual Ogier contact or any of our partners listed here for advice in connection with the appointment of AML Officers, CIMA filings and any necessary amendments to your fund's existing AML procedures and documentation to ensure compliance with the AML Regulations.