In September 2018 the Cayman Islands introduced changes to its anti-money laundering (AML) legislation, requiring an actual person rather than a company to be responsible for complying with the territory’s financial laws.
All financial bodies, including registered and unregulated funds (hedge funds exempt from registration with the Cayman Islands Monetary Authority), and private equity and investment managers, must appoint an Anti-Money Laundering Compliance Officer, a Money Laundering Reporting Officer and Deputy Money Laundering Reporting Officer as a legal requirement.
The identity and contact details of all AML officers must be easily available to the regulatory bodies, fund administrator staff and other compliance and reporting officers.
Among other things, these appointed persons must be of appropriate seniority, experience, authority and accessibility in order to fulfil this compliance role in management in the Cayman Islands. Accessibility also means that in practice they should be based in, or close to, the Cayman Islands, as the territory’s regulatory authorities only accept reports by fax or in person. However, regulators have offered no preference for an internal or external appointment to these roles and the choice is left up to each individual institution.
Anti-Money Laundering Compliance Officer (AMLCO)
The AMLCO’s primary job is to be responsible for the compliance program of the relevant financial business and to function as the point of contact with the authorities. This means that they must be accessible to the regulators when reported issues need discussion. It makes them the single point of contact for filing internal reports referred to them by staff.
There is also a requirement of persons providing AMLCO services in the Cayman Islands to ensure that appropriate checks and measures are in place to ensure compliance, primarily through regular audits.
The AMLCO must ensure that the financial business adopts and follows the regulations. To do this, the AMLCO is required to have access to the Board and unfettered access to all files associated with their fund, allowing them to provide comprehensive oversight of compliance.
The AMLCO will verify that a set of policies and procedures is produced, approved by the Board and implemented. An AMLCO is not responsible for creating these policies, but must ensure they exist, are up to date and implemented correctly. These policies and procedures set out the responsibilities of the AMLCO and reporting officers, as well as the reporting structure.
The AMLCO role also covers:
- Risk models and management for persons, countries and activities
- Identification, verification and record keeping
- Audit and other management tools
The frequency of audits is not strictly laid out and different firms take different approaches for different reasons. Broadly speaking, the options are: Whenever there’s a Board meeting (usually two or three times a year); annually, according to a set schedule; using risk assessment to rate the risk profile of a fund, with the outcome dictating the frequency of an audit.
Money Laundering Reporting Officer (MLRO) and their Deputy (DMLRO)
The roles of an MLRO and a DMLRO are broadly similar, varying only in seniority. These officers are responsible for identifying and reporting money laundering to the authorities. MLRO officers take responsibility for customer due diligence and looking at investors and shareholders, both the customers and the actual “beneficial owners” of a fund.
A person providing MLRO services in the Cayman Islands must:
- Gather, record and verify customer identities
- Gather, record and verify the identities of ultimate beneficial owners
- Understand the nature of the customer relationship to develop a customer risk profile
- Monitor customer transactions and maintain and update customer information on an ongoing basis
