Financial Crime World

Here is the rewritten article in Markdown format:

Compliance Procedures for Financial Institutions in Cayman Islands: A Guide to Meeting Regulatory Obligations

======================================================

The Cayman Islands have a robust anti-money laundering (AML) regime, comprising various laws, regulations, and guidance aimed at preventing and detecting money laundering, terrorist financing, and proliferation financing. The Proceeds of Crime Act, Anti-Money Laundering Regulations, and Guidance Notes on the Prevention and Detection of Money Laundering, Terrorist Financing, and Proliferation Financing in the Cayman Islands provide a comprehensive framework for financial institutions to comply with.

Key Requirements

Financial institutions conducting “relevant financial business” in the Cayman Islands must comply with detailed AML requirements. The definition of “relevant financial business” includes activities such as:

  • Accepting deposits
  • Providing money or value transfer services
  • Issuing and managing means of payment
  • Participating in securities issues
  • Investing, administering, or managing funds on behalf of others

Even if a financial institution’s activities do not technically fall within the definition of “relevant financial business,” counterparties will expect them to have adopted and be compliant with the AML Regime. To comply, financial institutions must:

  • Appoint an Anti-Money Laundering Compliance Officer, Money Laundering Reporting Officer, and Deputy Money Laundering Reporting Officer
  • Adopt a manual setting out procedures for identification and verification, risk management, internal control, and reporting mechanisms
  • Train employees on AML and counter-terrorist financing procedures
  • Have record-keeping procedures in place
  • Comply with sanction measures
  • Collect and periodically review due diligence documentation from investors

Regulatory Reporting Obligations

Financial institutions must also comply with regulatory reporting obligations under the US Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS). These regulations require non-US financial institutions to report details of accounts held by US citizens or taxpayers to the US Internal Revenue Service. The CRS allows tax authorities to gain a clearer understanding of financial assets held abroad by their residents.

Financial institutions must determine whether they are Reporting Financial Institutions, which includes:

  • Custodial institutions
  • Depository institutions
  • Specified insurance companies
  • Investment entities

Investment funds are typically in scope for FATCA and CRS reporting obligations.

To comply with regulatory reporting obligations, financial institutions must:

  • Identify the tax residency of account holders
  • Obtain a Global Intermediary Identification Number (GIIN) for FATCA purposes
  • Identify and report certain information of “reportable accounts” to the Cayman Islands Department for International Tax Cooperation (DITC) or file a nil return if no reportable accounts are held

Steps to Compliance

Our team has extensive experience in supporting financial institutions to fulfill their AML/KYC obligations. Our services include:

FATCA/CRS Services

  • Establishing and maintaining written policies and procedures to comply with AEOI
  • Appointing AEOI officers
  • Assisting with obtaining a GIIN for FATCA purposes
  • Registering with the DITC
  • Identifying investors’ tax residence
  • Collecting and validating self-certifications from investors
  • Preparing and submitting annual CRS XML reports and filing declarations

Compliance Services

  • Providing named individuals to act as AML Officers
  • Preparing compliance manuals and policies
  • Collecting due diligence documentation from investors
  • Conducting global sanctions and politically exposed person screening
  • Regulatory and AML consulting

For more information on compliance procedures for financial institutions in the Cayman Islands, please contact us.