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Cayman Islands: AML Compliance Requirements for Financial Institutions

The Cayman Islands has implemented a robust Anti-Money Laundering (AML) regime to combat money laundering, terrorist financing, and proliferation financing. The country’s financial institutions are required to adhere to strict AML compliance requirements to ensure the integrity of their operations.

Definition of Relevant Financial Business

Relevant financial business in the Cayman Islands includes:

  • Banking or trust business carried on by a person who is licensed under the Banks and Trust Companies Act (As Revised)
  • Acceptance by a building society of deposits
  • Business carried on by a co-operative society within the meaning of the Co-operative Societies Act (As Revised)
  • Insurance business and the business of an insurance manager, agent, or broker
  • Mutual fund administration or the business of a regulated mutual fund
  • Company management business as defined by the Companies Management Act (As Revised)

Additional Activities

Further activities constituting “relevant financial business” are set out in Schedule 6 to the Prevention of Money Laundering Regulations (2018). These largely replicate the activities set out in the definition of “financial institutions” in the Financial Action Task Force (FATF) Recommendations.

Designated Non-Financial Business and Professions

Certain designated non-financial business and professions (DNFBPs), including:

  • Law firms
  • Accounting firms
  • Real estate agents

are subject to specific AML requirements. For example, the Department of Commerce & Investment has issued guidance notes applicable to real estate and dealers in precious metals and stones.

AML Compliance Requirements

Financial institutions carrying out relevant financial business in or from the Cayman Islands must maintain certain AML/CFT/CPF procedures as appropriate, having regard to money laundering and terrorist financing risks and the size of the business. These requirements include:

  • Identification and verification of customers
  • Adoption of a risk-based approach to identify, assess, and determine the level of money laundering and terrorist financing risks
  • Record keeping in relation to customer identification and transactions
  • Internal controls and communication for ongoing monitoring of business relationships with customers
  • Designation of an Anti-Money Laundering Compliance Officer
  • Reporting of suspicious activity
  • Risk-screening of employees
  • Training employees on AML procedures

Sector-Specific Guidance

The Cayman Islands’ financial regulatory bodies have issued sector-specific guidance for different types of institutions, including:

  • Banks
  • Fiduciary institutions
  • Insurance businesses
  • Mutual funds
  • Money services business
  • Securities investment business
  • Virtual asset service providers

DNFBPs must also be mindful of sector-specific guidance issued by their applicable regulators.

Conclusion

The Cayman Islands’ AML regime is designed to ensure the integrity of its financial system and protect against money laundering, terrorist financing, and proliferation financing. Financial institutions operating in the country are required to adhere to strict AML compliance requirements to maintain their licenses and avoid penalties.