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AML Update – Natural Persons must be appointed as AML officers

Background

In October 2017 the Cayman Islands adopted the Anti-Money Laundering Regulations 2017 (the “Regulations”) and then in December 2017 the Cayman Islands Monetary Authority issued Guidance Notes regarding the Regulations. These updates were made to ensure that Cayman administrators and Cayman funds meet the highest standards in AML as advocated by the FATF. In February 2018, we amended our administration agreements so as to ensure that all JP Fund Administration (“JPFA”) Cayman fund clients would be compliant with the Regulations by delegating various AML obligations to JPFA as administrator.

Changes

Owing to certain perceived ambiguities in the language in the Guidance Notes and the resultant uncertainty in the industry as to the practical implications of the Regulations, CIMA has now issued a notice stipulating that Cayman investment funds must appoint natural persons as their Money Laundering Reporting officer (“MLRO”), Deputy MLRO and Anti-Money Laundering Compliance Officer (“AMLCO”). Once a fund has appointed suitable natural persons to the roles of MLRO, Deputy MLRO and AMLCO, then the fund can delegate the MLRO/AMLCO functions to an appropriate administrator, such as JPFA.

This is a substantial change in practice and so the date for compliance for all existing funds has been extended. The key dates are as follows:

New funds established from 1 June 2018 onwards must notify CIMA as to who has been designated MLRO, DMLRO and AMLCO as part of their registration application.

Existing regulated funds have until 30 September 2018 to notify CIMA as to who has been designated MLRO, DMLRO and AMLCO.

Unregulated funds (such as closed ended funds and funds exempt from CIMA registration) must comply with the Regulations by 31 May 2018 with the effect that they must appoint natural persons as MLRO, DMLRO and AMLCO by 1 June 2018 for new funds and by 30 September 2018 for existing funds.

Clarifications and Actions

CIMA will be updating the Guidance Notes to reflect these changes and to clarify the AML requirements. In the meantime, we suggest that Cayman investment funds consult with their legal counsel to determine who will be appointed to the various roles and the preparation of agreements to govern their responsibilities once the updated Guidance Notes are issued. If you would like us to make introductions to legal counsel in the Cayman Islands to discuss this matter please let us know and we would be happy to make appropriate introductions. JPFA will continue to be able to provide a full AML service as part of its administration services, but in order to be compliant with the Regulations funds will first need to determine the scope of the role undertaken by the natural persons and the extent to which it will be delegated to JPFA. Please note the dates for compliance as non-compliance will subject the fund to the risk of a substantial administrative fine from CIMA for non-compliance.


Dominic Lawton-Smith | Head of Private Equity e: dls@jpintegra.com
Philippa-Lucy Robertson | General Counsel e: plr@jpintegra.com