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Cayman Islands Takes Step Towards Easier Client Onboarding with New KYC Guidelines

The Cayman Islands Monetary Authority has introduced new guidance notes on preventing and detecting money laundering, terrorist financing, and proliferation financing in the territory. The amendments aim to facilitate remote client onboarding and ongoing monitoring of business relationships for financial service providers (FSPs) by allowing the use of electronic know-your-customer (e-KYC) and digital identification systems.

Benefits of the New Guidelines

According to Gary Smith, a partner at Loeb Smith Attorneys, this change could be a game-changer for Cayman investment funds and other regulated entities. It may reduce uncertainty surrounding the use of e-KYC/digital ID when onboarding clients and monitoring business relationships.

Verification Methods

Under the new guidelines, FSPs can verify corporate legal persons using publicly available sources such as company registries. Government-issued electronic identification documents are also acceptable, provided the FSP takes a risk-based approach (RBA) and has suitable policies and procedures to ensure authenticity.

Electronic Know-Your-Customer (e-KYC)

The guidelines define e-KYC as the process of electronically verifying a client’s identity, while digital ID refers to a system that covers identity proofing/enrolment and authentication. FSPs must apply RBA to remote onboarding and monitoring of business relationships to assess money laundering/terrorist financing risks.

Key Considerations

  • When relying on digital ID/e-KYC systems, FSPs must consider the basic components of technology solutions and take an informed RBA.
  • Ensure that chosen system’s assurance level aligns with the assessed level of money laundering/terrorist financing risks.
  • Implement robust documented policies and procedures for new digital ID systems/technology solutions, including:
    • Tiered approach
    • Policies for securely collecting and retaining records
    • Anti-fraud and cybersecurity processes

Video-Conferencing as an e-KYC Mechanism

FSPs can use video-conferencing as an e-KYC mechanism, but must implement appropriate controls during the process to verify identity and authenticity. The selfie, with a clear scanned copy of the identity document, is also accepted as evidence of identity.

Conclusion

Loeb Smith Attorneys’ Gary Smith and Elizabeth Kenny are available for comment on the new guidelines and their implications for FSPs in the Cayman Islands.