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Named Investor Accounts: A Low-Risk but Not Immune to ML/TF Risks

When dealing with named investor accounts, Financial Services Providers (FSPs) must be aware that although they are considered low-risk, they are not immune to Money Laundering/Terrorist Financing (ML/TF) risks. This article summarizes the key points related to assessing and mitigating these risks.

Understanding Named Investor Accounts

According to the guidance notes, a named investor account is viewed as low-risk due to its transparent nature. However, this does not mean that FSPs can be complacent and ignore other risk factors. The geographical location of customers, for instance, should also be taken into consideration when assessing ML/TF risks.

Key Considerations for FSPs

When conducting business with customers, FSPs must follow these key guidelines:

• Risk-Based Approach: FSPs must consider all relevant risks and take a risk-based approach to mitigate them.
• National Risk Assessment (NRA): The NRA report by the Cayman Islands Government should be taken into account during the risk assessment process.
• Vigilance and Reporting: All FSPs must exercise sufficient vigilance to detect and deter ML/TF activities, and report any suspicious activities to law enforcement agencies.
• Senior Management Involvement: Senior management must be engaged in decision-making processes and take ownership of the risk-based approach.
• Staff Training and Compliance: Staff must be adequately trained to identify suspicious activities and use internal reporting systems for compliance.

Conclusion

Named investor accounts may be considered low-risk, but FSPs must not underestimate the potential for ML/TF risks. By following these key considerations and guidelines, FSPs can effectively mitigate these risks and ensure a safer and more secure business environment.