AML Thresholds: When to Report Transactions

In a move to strengthen anti-money laundering (AML) measures, financial institutions in the Cayman Islands are required to report specific transactions exceeding certain thresholds. These thresholds vary depending on the type of transaction and institution involved.

Threshold Transactions

Under the AML Regulations 2020, money service businesses must report transactions exceeding US$3,500 in a single transaction or through multiple transfers within a one-month period.

Class A and Class B Bank Threshold Report

• Banks are required to furnish the Financial Reporting Authority (FRA) with a monthly report about all “threshold transfers” involving single wire transfers sent or received by the bank where the total money transferred equals or exceeds US$100,000.

Money Transportation and Reporting

• The Customs and Border Control Regulations 2019 impose requirements on individuals carrying cash exceeding $10,000.
• False declarations can result in fines up to US$10,000, imprisonment for up to one year, or both, with possible forfeiture of the money.

Reporting Suspicious Activity

• Financial institutions are required to report suspected money laundering or terrorist financing to the FRA, regardless of whether the amount meets the prescribed threshold.
• Failure to do so can result in severe penalties.

Cross-Border Transactions Reporting Requirements

• The Regulations require financial service providers to evaluate AML risks associated with different countries, particularly when dealing with cross-border transfers.
• Providers must also identify incomplete wire transfers and establish risk-based policies for executing or rejecting transactions.

Customer Identification and Due Diligence

• Financial institutions are required to tailor their procedures to the specific risks of a business, including:
  • Identifying and verifying applicants
  • Adopting a risk-based approach
  • Maintaining records
  • Implementing internal controls

Shell Banks Prohibition

• The Regulations prohibit financial institutions from forming business relationships or carrying out one-off transactions with shell banks, defined as institutions without a physical presence in their incorporating jurisdiction.

Reporting Suspicious Activity Criteria

• Individuals must promptly report suspicions of money laundering or criminal conduct to a designated officer.
• Entities are required to obtain customer due diligence information and file a suspicious activity report (SAR) if unable to do so.

Information Sharing Mechanisms

• The Regulations authorize supervisory authorities to exchange essential information to assess risks associated with money laundering.
• A public-private information exchange framework also exists, allowing government authorities and financial institutions to share information and boost AML efforts.

Beneficial Ownership Information

• The Cayman Islands operates under a beneficial ownership regime, which regulates the collection, maintenance, and sharing of information about the ultimate beneficial ownership or control of companies and limited liability companies.
• This information is available to assist financial institutions with their AML customer due diligence responsibilities as well as government authorities.