AML Regulations Update- Cayman Islands:

Designation of Anti-Money Laundering Compliance Officer (“AMLCO”), Money Laundering Reporting Officer (“MLRO”) and Deputy Money Laundering Reporting Officer (“DMLRO”)

Introduction:

The Cayman Islands is one of the world’s largest offshore hub to set up funds. By being a leader in the field of structured finance, Cayman has a strong relationship between the Government and the private sector, due to which it can be responsive to the ever-evolving business landscape.

Why do Fund Management Companies (FMC) want to set up funds in the Cayman Islands?

The Cayman Islands offers a variety of benefits for setting up funds, some of which are given below

  1. Reputation: Due to its well-established legal system, stability and strong financial industry, the Cayman island has built a strong reputation of being the preferred hub for the setup of offshore funds
  2. Tax Neutrality: The Cayman Islands has no taxes on capital gains, income profits, corporation or withholding taxes. If the investment fund is incorporated as an exempted company, it can obtain a renewable undertaking from the Cayman government that it will remain tax-free for up to 30 years, and in cases of a limited liability company, exempted trust, or an exempted limited partnership, the period is up to 50 years
  3. Registration: The time to setup a fund in the Cayman Islands is relatively fast. It takes around 2-5 days to set it up, provided that all necessary documentation is completed
  4. Compliance culture: The Cayman Islands is compliant with Anti-Money Laundering laws, and Anti-Terrorist Financing requirements of the Organization of Economic Cooperation and Development (“OECD”) and also the Financial Action Task Force (“FATF”)
  5. Exchange controls: There are no exchange regulations for currency transfer in and out of the Cayman Islands

To combat Anti-Money Laundering and to maintain the regulatory compliances, The Cayman Islands Monetary Authority (“CIMA“) has noted that for a Cayman Islands investment entity to comply with the Anti-Money Laundering Regulations (2018 Revision) (“AML Regulations“),  it must designate a natural person, at managerial level, to act as its Anti-Money Laundering Compliance Officer (“AMLCO“), Money Laundering Reporting Officer (“MLRO“) and Deputy Money Laundering Reporting Officer (“DMLRO“) by 31st December 2018. The responsibilities of the AMLRO, MLRO & DMLRO along with their qualifications are explained below. The AMLCO and MLRO can be the same person but the DMLRO must be different.

Anti-Money Laundering Compliance Officer (AMLCO)

Qualifications

  • Has to be Fit & Proper for the role
  • Must report directly to the Board of directors
  • Has sufficient seniority & authority so that board reacts and acts upon the recommendations made
  • Has sufficient resources and staff to carry out this responsibility
  • Has unrestricted access to all business lines, support departments and information necessary to appropriately perform the AML/CFT compliance function
  • has regular contact with the Board so that the Board is able to satisfy itself that statutory obligations are being met and that sufficiently robust measures are being taken to protect the FSP against ML/TF risks

Responsibilities

  • Develops and maintain systems and controls (including documented policies and procedures) in line with evolving requirements
  • Ensures regular audits of the AML/CFT program
  • Maintains various logs, as necessary, which should include logs with respect to declined business, PEPs, and requests from competent authorities particularly in relation to investigations;
  • Advises the Board of AML/CFT compliance issues that need to be brought to its attention
  • Reports periodically to the Board or Board committees (e.g. audit committee), as appropriate, on the FSP’s systems and controls
  • Responds promptly to requests for information by the relevant competent authorities

 

Money Laundering Reporting Officer (“MLRO”) & Deputy Money Laundering Reporting Officer (“DMLRO”)

Qualifications

  • Each Fund management company should designate a suitably qualified and experienced person as MLRO at management level, to whom suspicious activity reports must be made by staff
  • the person acting as MLRO can dedicate sufficient time for the efficient discharge of the MLRO function, particularly where the MLRO has other professional responsibilities
  • A Fund management company should also designate a Deputy Money Laundering Reporting Officer (“DMLRO”), who should be a staff member of similar status and experience to the MLRO. In the absence of MLRO, the DMLRO shall discharge the MLRO functions
  • The MLRO should be well versed in the different types of transactions which the FSP handles and which may give rise to opportunities for ML/TF
  • If the Fund management company does not have anyone in the Cayman Islands, where it may not be possible for a senior member of staff to be a MLRO, in such circumstances:
    • Identify a person with suitable qualifications and experience, who is fit and proper, as the appropriate person to assume the role of MLRO to whom an internal report is to be made, provided that that person has the following characteristics
      • is a natural person
      • is autonomous (meaning the MLRO is the final decision maker as to whether to file a suspicious activity report)
      • is independent
      • has and shall have access to all relevant material in order to make an assessment as to whether the activity is or is not suspicious

Responsibilities

  • Investigation of suspicious activities of the fund with respect to both investors and investment activity, so as to determine whether disclosure in accordance with the Anti-Money Laundering Regulations is appropriate.
  • Drafting and filing Suspicious Activity Reports (“SAR”) with the Financial Reporting Authority (“FRA”)
  • Maintain confidential logs of all SAR reporting in accordance with the fund’s vigilance systems.
  • Report as necessary to CIMA and the FRA
  • Access to all relevant material in order to make an assessment as to whether the activity is or is not suspicious

WHY Argus?

Argus can help advise on your AML/CFT obligations for your Cayman structures, alongside helping you manage and mitigate your AML/CFT risks on a local level as well. Reach out to us if you have any questions or queries on this article, and we will be happy to help at info@argusglobal.co

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