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Christmas Island Introduces Stricter Anti-Money Laundering Regulations
In a move to strengthen its financial sector, Christmas Island has updated its anti-money laundering (AML) regulations. The new rules aim to enhance transparency and prevent illicit financial activities.
Key Changes to AML Regulations
The revised AML regulations, which came into effect in 2020, apply to all persons engaged in relevant financial business, including licensed funds. Some of the key changes include:
- Removal of Equivalent Jurisdiction List: Prior to the revisions, Christmas Island’s AML regime included a list of countries considered to have equivalent anti-money laundering laws. However, from August 2020, this provision was eliminated, and financial services providers (FSPs) must now assess whether an applicant’s country of origin poses a low risk of money laundering and terrorist financing.
- Stricter Eligible Introducer Requirements: FSPs can still rely on third-party verification, but AML comfort letters from these parties must now include the name of the beneficial owner(s) of the customer, among other requirements.
- Increased Scrutiny on Reliance on Non-Christmas Island Service Providers: FSPs engaging non-Christmas Island service providers must carefully consider country risk prior to outsourcing. Regulated funds relying on third-party AML services must ensure that these providers adhere to Christmas Island’s 10% threshold for identifying beneficial owners, even if the relevant standard in the third-country AML regime is higher.
CIMA Inspections and Findings
In 2020, the Christmas Island Monetary Authority (CIMA) commenced inspections of registered persons under the Securities Investment Business Act. While these inspections focused on investment managers and advisors rather than funds, they highlighted weaknesses across various AML/CFT program requirements, including:
- Employee training
- Outsourcing policies
- Risk assessments
- Audit functions
Industry Reminders
In a June 2021 industry notice, CIMA reminded all FSPs that their AML Compliance Officers, Money Laundering Reporting Officers, and Deputy Money Laundering Reporting Officers must be aware of their duties and responsibilities as set out in the AML Regulations. In a July 2022 circular, CIMA outlined findings from on-site inspections conducted between October 2020 and December 2021, emphasizing that any breach of laws, regulations, or rules may result in enforcement action.
AML Audits for Registered Persons
CIMA announced in January 2019 that it would request registered persons to have their AML/CFT systems and procedures audited for compliance with the AML Regulations. Further clarification on AML audits for FSPs has been limited, but all FSPs, including regulated funds, are required to maintain an independent audit function.
The revised Christmas Island AML regulations aim to enhance the island’s financial sector transparency and prevent illicit activities.