The principal legislation in the Cayman Islands which seeks to combat money laundering and the financing of terrorism is The Proceeds of Crime Act (Revision) (the “PCL”) and The Anti-Money Laundering Regulations (Revision) (the “Regulations”).
ARE YOU CARRYING OUT “RELEVANT FINANCIAL BUSINESS”?
“relevant financial business” means the business of engaging in one or more of the following —
(a) banking or trust business carried on by a person who is for the time being a licensee under the Banks and Trust Companies Law (2020 Revision);
(b) acceptance by a building society of deposits made by any person (including the raising of money from members of the society by the issue of shares);
(c) business carried on by a co-operative society within the meaning of the Co-operative Societies Act (2020 Revision);
(d) insurance business and the business of an insurance manager, an insurance agent and an insurance broker, who is licenced pursuant to the Insurance Act, 2010, that is connected with insurance business;
(e) mutual fund administration or the business of a regulated mutual fund within the meaning of the Mutual Funds Act (Revision);
(f) the business of company management as defined by the Companies Management Act (Revision), except that the services specified in section 3(4)(a) of that Law shall not be excluded for the purposes of Regulations made under this Law from the provision of the specified services as defined in subsection (2) of that section.
Activities falling within the Definition of “Relevant Financial Business”
Any activity related but not limited to —
1. Acceptance of deposits and other repayable funds from the public.
2. Lending.
3. Financial leasing.
4. Money or value transfer services.
5. Issuing and managing means of payment (e.g. credit and debit cards, cheques, traveller’s cheques, money orders and bankers’ drafts, electronic money).
6. Financial guarantees and commitments.
7. Trading in —
(a) money market instruments (cheques, bills, certificates of deposit, derivatives etc.);
(b) foreign exchange;
(c) exchange, interest rate and index instruments; (d) transferable securities; or
(e) commodity futures trading.
8. Participation in securities issues and the provision of financial services related to such issues.
9. Advice to undertakings on capital structure, industrial strategy and related questions and advice and services relating to mergers and the purchase of undertakings.
10. Money broking.
11. Individual and collective portfolio management and advice.
12. Safekeeping and administration of cash or liquid securities on behalf of other persons.
13. Safe custody services.
14. Financial, estate agency (including real estate agency or real estate brokering), legal and accounting services provided in the course of business relating to —
(a) the sale, purchase or mortgage of land or interests in land on behalf of clients or customers;
(b) management of client money, securities or other assets;
(c) organization of contributions for the creation, operation or management of companies;
(d) management of bank, savings or securities accounts; and
(e) the creation, operation or management of legal persons or arrangements, and buying and selling of business entities.
14A. Undertaking property development within the meaning set out in section 2 of the Trade and Business Licensing Act (Revision) and the subsequent sale of that property without using a real estate agent or broker.
14B. Undertaking property investment without using a real estate agent or broker.
15. The services of listing agents and broker members of the Cayman Islands Stock Exchange as defined in the CSX Listing Rules and the Cayman Island Stock Exchange Membership Rules respectively.
16. The conduct of securities investment business.
17. Dealing in precious metals or precious stones, when engaging in a cash transaction that is equivalent to fifteen thousand United States dollars or more.
18. The provision of registered office services to a private trust company by a company that holds a Trust licence under section 6(5)(c) of the Banks and Trust Companies Act (Revision).
19. Otherwise investing, administering or managing funds or money on behalf of other persons.
20. Underwriting and placement of life insurance and other investment related insurance.
21. Providing virtual asset services.
22. Operating a single family office.
IF MY CAYMAN ENTITY IS CONDUCTING “RELEVANT FINANCIAL BUSNESS” HOW DO I COMPLY?
Appoint an Anti-Money Laundering Compliance Officer (“Compliance Officer”)
Regulation 3(1) of the Regulations requires any person carrying out relevant financial business to designate a person at the managerial level as the Compliance Officer. The Compliance Officer shall (i) ensure that measures set out in the Regulations are adopted by the person carrying out
relevant financial business; and (ii) function as the point of contact with competent authorities for the purpose of the Regulations.
Appoint a Money Laundering Reporting Officer (“MLRO”) and a Deputy MLRO (“DMLRO”)
Regulation 33(1) of the Regulations requires any person carrying out relevant financial business to designate a person at the managerial level as the money laundering reporting officer and an alternate to such officer. The MLRO is the person to whom a suspicious activity report is to be made. The DMLRO is required to discharge the functions of the MLRO in its absence.
Maintain various procedures in relation to the business
A person that conducts relevant financial business is required to maintain the following procedures:-
Identification and verification procedures – Pursuant to Part IV of the Regulations details specific requirements in relation to customer due diligence. In particular, a person carrying out relevant financial business shall:-
not keep anonymous accounts or accounts in fictitious names;
undertake customer due diligence measures when (i) establishing a business relationship, (ii) carrying out a one-off transaction valued in excess of US$15,000 (whether in one transaction or a series of smaller transactions), (iii) carrying out a one-off transaction that is a wire transfer, (iv) there is a suspicion of money laundering or terrorist financing; or (v) the person has doubts about the veracity or adequacy of previously obtained customer identification data;
identify a customer and verify their identity using reliable,
independent source documents, data or information;
verify that a person purporting to act on behalf of a customer is properly authorised and identify and verify their identity;
identify a beneficial owner and take reasonable measure to verify the identity of the beneficial owner;
understand and obtain information on the purpose and intended nature of the business relationship;
conduct ongoing due diligence on a business relationship including:
scrutinizing transactions undertaken throughout the course of the business relationship to ensure that transactions being conducted are consistent with the person’s knowledge of the customer, the customer’s business and risk profile; and
ensuring that documents, data or information collected under the customer due diligence process is kept current and relevant; and
put in place risk-management systems to determine whether a person or beneficial owner with whom that person has a business relationship is a politically exposed person, family member or close associate.
Adopt a risk-based approach
As set out in Part III of the Regulations, a person carrying out relevant financial business is required to take steps appropriate to the nature and size of the business to identify, assess and understand its money laundering and terrorist financing risks in relation to their customers, the area where the customer resides or operates, the products, services and transactions provides and the delivery channels. Of particular relevance to a Fund is a requirement that a person carrying out relevant financial business in respect of new products and business practices, new delivery mechanisms and new or developing technologies shall: (i) undertake assessment of risk prior to the launch or use of the new products and business practices, new delivery mechanisms and new or developing technologies; and (ii) take appropriate measures to manage and mitigate risks.
Screen employees
Prospective and current employees should be screened to ensure high standards.
Record-keeping procedures
Part VIII of the Regulations requires various records to be kept in relation to business relationships and customers and shall ensure that all customer due diligence information and transaction records are available without delay upon request by competent authorities.
Sanctions Compliance
You are required to maintain adequate systems to identify risk in relation to persons, countries and activities which shall include checks against all applicable sanction lists.
o Risk-management procedures – You are required to adopt risk- management procedures concerning the conditions under which a customer may utilise the business relationship prior to verification.
Non-compliant countries
You must observe the list of countries, published by any competent authority, which are non-compliant, or do not sufficiently comply with the recommendations of the Financial Action Task Force.
Internal reporting procedures
Regulation 34 of the Regulations requires procedures to be in place for the reporting of suspicious activity etc.
Other procedures and controls
You must maintain such other procedures of internal control, including an appropriate effective risk- based independent audit function and communication as may be appropriate for the ongoing monitoring of the business relationships or one-off transactions for the purpose of forestalling and preventing money laundering and terrorist financing.
Training of Employees
You are required to make employees aware of the procedures referenced above and to provide training in the recognition and treatment of transactions carried out by, or on behalf of, any person who is, or appears to be, engaged in money laundering.
HOW TO MEET THE OBLIGATIONS AND REQUIREMENTS
Appoint a professional service provider in the region to provide Cayman Islands specific compliance officers and services from the Cayman Islands. It is often not advisable to appoint compliance officers in other regions unless they do not specifically understand the requirements under Cayman law and the regulations. Bell Rock’s Compliance & Regulatory Group routinely provides experienced and qualified AML officers for our clients Cayman companies. For further information, please contact us: compliance@bellrockgroup.com