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Cayman Islands Adopts Digital Identity Verification Methods
The Cayman Islands Monetary Authority (CIMA) has recently updated its guidelines on preventing money laundering, terrorist financing, and proliferation financing in the Cayman Islands to incorporate electronic Know-Your-Customer (e-KYC) and remote customer due diligence (CCD) provisions.
Background
CIMA has received numerous queries from financial service providers (FSPs) regarding whether its Anti-Money Laundering Regulations (AMLRs) allow for the use of technological solutions for remote customer onboarding and ongoing CCD. The Authority’s Guidance Notes have been expanded to specifically address this issue.
Key Changes
The updated Guidance Notes define key terms such as “remote onboarding,” “e-KYC,” and “video-conferencing.” FSPs are required to:
- Assess the money laundering/terrorist financing risks associated with their delivery channels, including remote onboarding and ongoing monitoring of business relationships.
- Align customer identification and verification methods with their risk assessment.
Risk Assessment
FSPs must conduct formal risk assessments of new e-KYC/digital ID technology and consider:
- Not using these solutions for higher-risk customers or transactions.
- Reverting to face-to-face interactions or reviewing original certified documents in certain cases.
Policies and Procedures
FSPs are required to have robust policies and procedures in place for remote onboarding, including measures to:
- Verify official constitutive or formation documents, such as certificates of incorporation, trust deeds, and other identity documentation.
- Maintain records of identification data obtained through digital ID systems and e-KYC procedures.
CDD - For Legal Persons and Arrangements
FSPs may use publicly available sources, including company registries, to verify corporate legal persons. Video-conferencing can be used to onboard customers who are:
- Corporate legal persons.
- Legal arrangements, such as trusts and foundations.
Video Conferencing and “Selfie” Documents
FSPs must ensure that official documents presented during video-conferencing or via electronic means are verified through alternative measures if public sources are unavailable. Verification of documents through “selfie” photographs or videos is also permitted, but a clear scanned copy of the identity document itself must be provided.
Simplified Due Diligence
FSPs may consider digital ID systems/e-KYC processes with lower levels of assurance to be sufficient for simplified due diligence in cases of low ML/TF risk.
Record Keeping
FSPs are required to maintain records of identification data obtained through digital ID systems and e-KYC procedures, which must be easily accessible and made available to competent authorities upon request.
The Cayman Islands Monetary Authority supports the responsible adoption of remote/virtual/non-face-to-face technologies by FSPs to mitigate ML/TF/PF and sanctions risks. However, FSPs must consider the associated risks and ensure that identified risks are effectively managed.
For any further queries, please email ContactAMLCFT@cima.ky.