Entity Requirements

The Financial Action Task Force issued Guidance for a Risk-Based Approach (FATF Guidance), which has been adopted in many respects in the Anti-Money Laundering Regulations (AML Regulations) and the Guidance Notes on the Prevention and Detection of Money Laundering, Terrorist Financing and Proliferation Financing in the Cayman Islands (Guidance Notes). 

Consequently, the AML Regulations and Guidance Notes require that entities conducting ‘relevant financial business’ must:

1. Ensure the ongoing monitoring of business relationships or one-off transactions to prevent, counter and report money laundering (ML), terrorist financing (TF) and proliferation financing (PF); and
2. Conduct ongoing due diligence on business relationships, including the scrutinization of transactions undertaken during the course of the business relationships to ensure the transactions being conducted are consistent with the entity’s knowledge of the customer/investor, their business and risk profile and their source of funds.

Practically speaking, these requirements involve keeping documents and information collected as part of the customer due diligence process be kept up to date and accurate. Further, transactions must be reviewed to ensure they are consistent with the entity’s knowledge of their customers. Cayman funds and entities and their service providers should have policies and procedures in place regarding ongoing monitoring, including periodic reviews in line with the entity’s AML/CFT risk and action to be taken in the event of a trigger event.

Entities should have a process in place to monitor unusual transactions and a further process in place to investigate and make a suspicious activity report to the Cayman Islands Financial Reporting Authority (FRA) where such transaction monitoring picks up an alert.

Matters for Consideration by Entities

Entities conducting ‘relevant financial business’ should consider taking the following steps:

• Review its existing customer identification/KYC procedures – the entity should already be conducting customer identification/KYC procedures (whether by itself or through a delegate).  The entity should review this procedure (or confirm with the delegate) to ensure compliance with the AML Regulations and, where the entity delegates these functions, considering expanding the scope of such delegation to include compliance with the AML Regulations where needed.

• Appoint the required officers – the AML Regulations require the appointment of a Compliance Officer, Money Laundering Reporting Officer (MLRO) and Deputy MLRO, which can also be provided by a delegate.

• Adopt and maintain appropriate policies and logs – The entity’s AML Manual should be supplemented with ancillary logs and reports such as a suspicious transactions report and log and a suspicious activities report and log.

• Engage a service provider to ensure compliance with the AML Regulations – Both the AML Regulations and the FATF Guidance permit ongoing monitoring to be delegated to a service provider.

Delegation to Bolder Group

It is common for entities to delegate ongoing transaction monitoring activities to a service provider such as Bolder Group.  While the entity remains ultimately responsible for compliance, the Cayman Islands Monetary Authority (CIMA) is satisfied that the AML Regulations and Guidance Notes are being adhered to if the following are observed:

1. Details of and written evidence of the suitability of the delegate to perform the ongoing monitoring activities of Cayman funds and investment businesses, which should be made available to CIMA upon request;
2. There must be a clear understanding between the entity and the delegate as to the specific ongoing monitoring functions to be performed;
3. Applicable customer/investor due diligence information must be made available to CIMA on request and to the FRA and other law enforcement agencies in accordance with relevant procedures; and
4. The entity must satisfy itself on a regular basis as to the reliability of the delegate’s systems and procedures.

Bolder Group is uniquely experienced and offers Cayman Investment Funds and Securities Investment Businesses the comfort of the following:

• Internal policies, procedures and physical and technological measures are in place to protect information that a customer/investor of the Fund might reasonably expect to be confidential;

• Proper safeguards are in place for the collection, storage and processing of customers’/investors’ confidential information and for prevention against unauthorized access, misuse or misappropriation;

• Effective control and oversight of the delegated ongoing monitoring functions;

• Proprietary information or customer/investor information will not be used unless it is necessary for providing the delegated services; and

• Disclosure of customer information required by law will be notified to the Fund, where allowed by applicable law.

Contact Bolder Group’s Global Head of Governance, David Payne, at david.payne@boldergroup.com or +34 640813229 to discuss how we can assist with complying with the ongoing monitoring requirements of your Cayman funds and businesses.