By Andrew Millar & Gerrard Finnegan, Estera – While New Year is generally a time of celebration, recent history has shown that it can also ring in a regulatory deadline or two. As the world welcomed in 2018, Europe saw the Markets in Financial Instruments Directive (MiFID II) come into force. And later this year, it’s the turn of the Cayman Islands, with a final deadline for the revised Proceeds of Crime Law landing on 31 December.
The revised Law has broadened the scope of entities that are subject to the Cayman Islands’ anti-money laundering (AML) laws and regulations. It now goes beyond traditional financial service providers to include entities that are ‘investing, administering or managing funds or money on behalf of other persons’, and those carrying out the ‘underwriting and placement of life insurance and other investment-related insurance’.
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. Certain structured finance vehicles whose activities weren’t previously covered by the definition of Relevant Financial Business now fall under the new Law.
The AML regulations require in-scope entities to designate a natural person for three positions: an anti-money laundering compliance officer (AMLCO), a money laundering reporting officer (MLRO), and a deputy money laundering reporting officer (DMLRO) (the Officers). All Officers must, unsurprisingly, have the adequate knowledge and expertise to perform the function.
So what exactly do these three roles entail?
Firstly, the AMLCO will be responsible for: ensuring the entity implements the measures outlined in the AML regulations, covering both the funds investor and investment processes; be the point of contact with the competent authorities; and report to and advise the board of compliance matters requiring their attention for the purpose of the regulations.
The MLRO and the DMLRO are charged with processing suspicious activity reports, with responsibilities to provide notification of their appointment to delegated parties; to assess, process and report suspicious activity reports as required; and to handle reports immediately on an ongoing basis.
The AMLCO can also act as either MLRO or DMLRO, but the MLRO and DMLRO must be two separate people. Funds can delegate these roles to employees of their administrator, investment manager, board members or other service providers.
Regulated funds need to notify CIMA of the appointed Officers through the CIMA REEFS portal, before 31 December 2018. The appointments should already be in place from 30 September 2018.
Unregulated entities conducting Relevant Financial Business have a deadline of 31 December 2018 to appoint the Officers. There is no CIMA notification requirement.
If you have an entity that falls into scope of this new regime, you need to ensure you are compliant to avoid any regulatory fines or actions under the Monetary Authority (Administrative Fines) Regulations.
Punitive measures under the new regime include fines and in certain cases imprisonment.
Estera can help you meet these requirements as we have considerable experience in providing anti-money laundering services to our clients and upholding AML standards internationally. We are familiar with the regulatory landscape affecting the Cayman Islands fund industry and understand how it affects and supports your business goals.
We are well positioned to provide a dedicated, experienced and professional team, who are equipped with the skills, tools and regulatory knowledge to protect your fund and ensure a consistent standard of service aligned to your needs and expectations.
Please contact us to find out how we can help you.
T: +1 345 640 0548
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