Our article published last month advised on changes to the anti-money laundering (AML) regime in the Cayman Islands for funds. Highlighted in that article was that unregistered funds such as closed-ended funds (which generally include most private equity, venture capital and real estate funds due to the illiquid underlying assets) will be subject to KYC requirements from 31 May 2018, same as registered funds, meaning compliance with Cayman KYC requirements. This includes unregistered funds completing KYC on existing investors by 31 May 2018.
The Cayman Islands Monetary Authority (CIMA) has provided further clarifications and confirmations on the changes to the AML regime.
All registered and unregistered investment funds must designate a natural person as the Compliance Officer, Money-Laundering Reporting Officer and Deputy Money-Laundering Reporting Officer; with registered funds obliged to notify CIMA of the identity of such persons: on or before 30 September 2018 for existing funds; and on submission of the registration application for funds registering with CIMA on or after 1 June 2018. This could be a fund administrator staff member, fund director or any other person. Importantly, the Compliance Officer must not only supervise investor-related AML issues and compliance, but also the fund's investment activities.
We expect that all funds will need to undertake certain steps as a result of the changes to the AML regime. These include (a) checking if the fund administrator is subject to an AML regime that is equivalent to the Cayman Islands (b) specifically identifying individuals to serve in the new officer roles specified above and eventually offering documents updated when convenient to include the appointment of these officers and their biography and (c) installing procedures to ensure the new officers have sufficient authority and access to the investor take-on process, the investment activities of the fund and the board itself to ascertain that the fund has complied with the AML regime. For point (a), funds must document and demonstrate in writing their assessment of their administrators which includes considering the AML regime of the country where the administrator is situated. Each of these steps should be documented by board resolutions and specific advice taken.
CIMA intends in due course to issue both a set of FAQs and an updated Guidance Notes which may result in some “fine tuning” of the AML regime in response to industry feedback.