Cayman Islands Tightens Anti-Money Laundering Regulations
The Cayman Islands has strengthened its anti-money laundering regulations, imposing new obligations on financial institutions and law firms to prevent illegal activities such as money laundering, terrorist financing, and proliferation financing.
New Obligations for Financial Institutions and Law Firms
According to the new Anti-Money Laundering Regulations (AMLRs), all persons engaged in relevant financial businesses must implement a robust AML/ CFT/CPF framework within their organizations. This includes:
- Conducting customer due diligence measures
- Identifying and assessing money laundering risks
- Putting procedures in place to ensure awareness of financial sanctions
Customer Due Diligence Measures
Firms are required to undertake customer due diligence when establishing business relationships or carrying out transactions valued at over CI$10,000. Enhanced due diligence is also necessary in certain circumstances.
Money Laundering Risks Assessment
The regulations stipulate that firms must identify, assess, and understand their money laundering risks, including those related to:
- Customers
- Countries
- Products
- Services
- Delivery channels
Designation of Money Laundering Reporting Officer (MLRO)
Financial institutions are required to designate a MLRO and a Deputy MLRO to whom reports of suspicious transactions must be made. The MLRO or DMLRO is responsible for deciding whether information or matters reported give rise to knowledge or suspicion of money laundering or terrorist financing.
Employee Training
The regulations also require firms to provide employees with training on recognizing and treating transactions related to:
- Money laundering
- Terrorist financing
- Proliferation financing
Employees must also be aware of the procedures they need to follow in relation to internal systems and controls.
Law Firms Requirements
Law firms that carry out relevant financial business are required to ensure they have appropriate systems and controls in place to adequately monitor and report on anti-money laundering activities. Firms must also keep accurate records of their AML activities, as per the regulations.
Compliance Monitoring
The Cayman Islands Anti-Money Laundering Authority (CARA) has the power to conduct on-site visits, request information, and require attendance at its request. The authority warns that firms that do not comply with the regulations may be subject to:
- Administrative fines
- Criminal prosecution
Objectives of the New Regulations
The new regulations are aimed at ensuring that financial institutions and law firms in the Cayman Islands are adequately equipped to prevent money laundering and other illegal activities. CARA expects firms to have procedures in place to ensure they are up-to-date with any amendments made to the AMLRs, and non-compliance may result in severe penalties.
By implementing these new regulations, the Cayman Islands is demonstrating its commitment to combating financial crimes and maintaining a secure financial environment for its citizens and institutions.