What Are the Duties of the Anti-Money Laundering Officers of a Cayman Fund?
All Cayman Islands funds are required to designate a natural person at managerial level as their Anti-Money Laundering Compliance Officer (AMLCO), Money Laundering Reporting Officer (MLRO) and Deputy MLRO (DMLRO).
This publication outlines the primary duties of each of the AMLCO, MLRO and DMLRO (AML Officers) as they apply to hedge funds, private funds and unregulated funds in the Cayman Islands (Funds).
Cayman AML Officer Requirements
The appointment of the AML Officers is required for the purpose of ensuring compliance by their Funds with the requirements of the Proceeds of Crime Act (Revised) relating to money laundering and other criminal conduct and with the requirements of the Anti-Money Laundering Regulations (Revised) (Regulations).
The Regulations specifically impose on any designated AMLCO the broad duty to ensure that measures set out in the Regulations are adopted by the Fund.
The Guidance Notes on the Prevention and Detection of Money Laundering, Terrorist Financing and Proliferation Financing in the Cayman Islands (Guidance) produced by the Cayman Islands Monetary Authority (CIMA) sets out additional requirements clarifying the role of each of the AML Officers.
The Duties of the Anti-Money Laundering Compliance Officer of a Cayman Fund
The role of AMLCO to a Cayman Fund involves the following duties:
- to oversee the compliance function of the Fund including the effectiveness of its anti-money laundering and countering the financing of terrorism (AML) systems, its compliance with applicable AML legislation and guidance and the day to day operation of its AML policies and procedures;
- to be a person who is fit and proper to assume the role of AMLCO;
- to maintain sufficient skills and experience and to have sufficient seniority and authority to ensure that the Fund’s governing body acts on their recommendations;
- to ensure regular direct contact with the Fund’s governing body to advise them on whether the Fund is meeting its statutory obligations and the strength of the measures it’s taking against money laundering and terrorist financing risks;
- to maintain sufficient resources including those of time and staff;
- to have unfettered access to all service providers and information relating to the Fund as necessary to discharge the role of AMLCO;
- to develop, maintain and monitor systems and controls in line with existing and evolving AML requirements including risk assessment policies and procedures appropriate to their size, nature and complexity of the Fund;
- to ensure regular audits of the Fund’s AML program to test the AML systems and ensure that they adhere to the AML requirements;
- to maintain various logs for the Fund, as necessary, which should include logs with respect to declined business, politically exposed persons, and requests from competent authorities particularly in relation to investigations;
- to advise the operators of the Fund of AML compliance issues relating to the Fund’s activities or investors that need to be brought to its attention;
- to report periodically and not less than annually to the operators of the Fund on the Fund’s AML systems and controls and those of its service providers;
- to respond promptly to requests for information by the relevant competent authorities;
- to ensure that that any staff member of the Fund or those of its service providers involved in the relevant activities of the Fund is aware of the identity of the MLRO (and DMLRO) and are screened and appropriately trained in accordance with the AML regime; and
- to ensure that all internal suspicious activity reports are submitted to the MLRO or in their absence to the DMLRO.
The Duties of the Money Laundering Reporting Officer of a Cayman Fund
The role of MLRO to a Cayman Fund involves the following duties:
- to receive reports of any activity, information or other matter relating to the Fund’s activities or investors which comes to the attention of any person and which, in the opinion of that person, gives rise to a knowledge or suspicion or reasonable grounds for knowing or suspecting that another person is engaged in, or a transaction or attempted transaction relates to, money laundering or terrorist financing (suspicious activity reports) made by the Fund’s staff or those of its service providers;
- to be autonomous, being the final decision maker as to whether to file suspicious activity reports with the Financial Reporting Authority in the Cayman Islands (FRA);
- to be independent (meaning having no vested interest in the underlying activity of the Fund, CIMA has determined that the MLRO cannot be a director or equity holder of their Fund);
- to dedicate sufficient time for the efficient discharge of the MLRO function, particularly where the MLRO has other professional responsibilities;
- to be suitably qualified and experienced for the role of MLRO;
- to be well versed in the different types of transactions which the Fund handles and which may give rise to opportunities for money laundering or terrorist financing;
- where located outside of the Cayman Islands and filing a suspicious activity report with the appropriate authority in their home country, to simultaneously file a suspicious activity report with the FRA where permitted by the laws and regulations of their home country;
- to have access to all relevant material in order to make an assessment as to whether an activity detailed in a suspicious activity report received by the MLRO is or is not suspicious;
- to determine whether the information contained in any suspicious activity report received from the Fund’s staff or those of its service providers supports the suspicion detailed therein and to investigate the details in order to determine whether in all the circumstances they should in turn submit a report to the FRA;
- to promptly submit a suspicious activity report to the FRA where they decide that an internal suspicious activity report substantiates the suspicions detailed therein;
- to record fully the reasons for their decision not to submit a suspicious activity report to the FRA where they decide that an internal suspicious activity report does not substantiate the suspicions detailed therein;
- to establish and maintain a register of suspicious activity reports made to them by the Fund’s staff and those of its service providers;
- to receive in-depth training on all aspects of the primary AML legislation, the Regulations, supervisory and regulatory rules and guidance and relevant internal policies; and
- to receive appropriate initial and ongoing training on the investigation, determination and reporting of suspicious activities, on the feedback arrangements and on new trends of criminal activity.
The Duties of the Deputy Money Laundering Reporting Officer of a Cayman Fund
The role of DMLRO to a Cayman Fund involves the following duties:
- to have a similar status to the MLRO;
- to have similar experience to the MLRO;
- to receive the same training as the MLRO; and
- to discharge the MLRO functions in the absence of the MLRO.
Delegation of the Anti-Money Laundering Officer Roles
A Fund may designate its AMLCO to also act as MLRO or vice versa as far as the person is competent, has sufficient time to perform both roles efficiently and understands the roles and responsibilities of each function. A person designated as MLRO for a Fund may not also act as the DMLRO of that Fund.
Irrespective of whether the AML Officers are employees and the Fund is performing the function on its own, or has delegated the performance of the compliance functions to a person or relied on a person to perform the compliance functions, the Fund is ultimately responsible for complying with the applicable AML obligations.
Our Funds and Regulatory Support in the Cayman Islands
Our funds and regulatory team have seen an increased demand from clients for advice and assistance on ensuring that their regulatory policies and procedures are aligned with CIMA’s expectations as contained in the AML legislation, Regulations and Guidance. We regularly advise our Fund clients and their appointed AML Officers on how best to discharge their AML obligations.
Our board support services, if not already adopted by our Fund clients, can provide an essential tool to ensure that they are appropriately addressing the Cayman AML requirements and that they are kept up to date with all regulatory developments in the Cayman Islands.
