30 September Deadline to Appoint AML Officers For Existing Investment Entities

Cayman Islands investment entities that are conducting relevant financial business1 (which includes investment funds and investment managers registered as excluded persons under the Securities Investment Business Law (SIB Law)) (Investment Entities) are reminded that they must appoint individuals at managerial level as their anti-money laundering compliance officer, money laundering reporting officer and deputy money laundering reporting officer (AML Officers) by 30 September 2018. These appointments are required following changes made to the Cayman Islands anti-money laundering (AML) regime earlier this year.

As we set out in our earlier alert, all Investment Entities which are subject to the AML Regulations must designate natural persons as AML Officers. As made clear by updated AML Guidance Notes and notices issued by the Cayman Islands Monetary Authority (CIMA), AML Officers can be provided by an Investment Entity’s service providers. Harneys Fiduciary offers AML Officer services, additional information on our Compliance Outsourcing services can be found here.

What are the deadlines?

All Investment Entities that are now being formed must appoint AML Officers at the outset. For those Investment Entities that were already existing on 1 June 2018 the deadline for these appointments is 30 September 2018. In addition, all Investment Entities registered with CIMA (eg mutual funds or excluded persons under SIBL) must confirm the names of their AML Officers by making a filing on CIMA’s REEFS portal.

Investment Entities that are not CIMA registered (eg private equity funds) are not currently required to make any filings with any Cayman Islands authority regarding the details of their AML Officers.

CIMA registered entities which are terminating

An important point to note for CIMA registered Investment Entities is that, if they apply to terminate their registration/license by 30 September on the basis that the entity is ceasing to operate, they do not have to appoint AML Officers.

Investment Entities which are applying to terminate their registration/licence for other reasons, eg mutual funds which will continue as closed-ended funds, must still appoint AML Officers.

CIMA can impose substantial administrative fines for breach of the AML Regulations.

What should Investment Entities do to comply?

Investment Entities that have not yet made these appointments should:

  • identify and appoint suitable natural persons as AML Officers by 30 September 2018 and make any mandatory filings with CIMA
  • review their service provider agreements to make sure that the delegation of any function (eg investor due diligence to a fund administrator) and any reliance on others is addressed. Of particular note is the explicit requirement that AML policies and procedures must cover the business activities of the relevant entity (ie monitoring downstream investment activities) as well as customer due diligence, and
  • update their documentation and procedures regarding anti-money laundering compliance generally. For investment funds, CIMA has confirmed that it expects confirmation of the appointment of the AML Officers to be included in fund offering documents. The names of the individuals do not need to be disclosed.

Harneys’ investment funds and regulatory team is well versed in all aspects of the new requirements, so please contact your usual Harneys contact if you would like advice on compliance with the AML regime in Cayman or if you have any other questions or visit harneys.com/Cayman.

 

1Over and above being registered or licensed under any of Cayman Islands’ regulatory laws (including being registered as a mutual fund or an excluded person with CIMA), this now includes any entity which is ‘otherwise investing, administering or managing funds or money on behalf of other persons’ which is a much broader catch-all than previously existed in the Cayman Islands.