Important amendments to AML rules now in force in Cayman Islands

Further key changes to the Cayman Islands anti-money laundering (AML) regulations were gazetted on 5 February.

The amendments address some recommendations made by the Caribbean Financial Action Task Force (CFATF) in last year’s mutual evaluation report on the jurisdiction’s AML regime. The CFATF report, published in March 2019, prompted the Cayman Islands government to appoint a dedicated task force to create and execute a comprehensive action plan to correct the report’s highlighted ‘strategic deficiencies’.

As part of this effort, 11 Bills were presented to the Legislative Assembly in July 2019. With the CFATF’s February 2020 deadline now imminent the new measures are being rushed into force.

The latest amendments to the Cayman Islands Anti-Money Laundering Regulations (2020) include:

• abolition of the ‘equivalent jurisdiction list’ as a factor in whether Cayman Islands entities carrying on ‘relevant financial business’ must apply simplified due-diligence to an entity applying to do business with them. From 5 August 2020, financial services providers will have to make these decisions by conducting risk assessments on the applicant that will need to be recorded on the customer file;
• application of a 10 per cent beneficial ownership threshold. The regulations require identification and verification of beneficial owners of legal persons at a threshold of only 10 per cent, unless simplified due-diligence is applicable. Although the threshold in many jurisdictions of service providers that carry out AML functions for Cayman Islands entities is 25 per cent, the Cayman Islands Monetary Authority has now made clear that there is no basis for deviating from the statutory 10 per cent threshold for corporate entities and partnerships;
• the know your customer (KYC) confirmations provided by an eligible introducer must now list the applicant for business being introduced, and (for non-natural persons) their beneficial owners. Financial service providers must monitor the relevant customers and beneficial owners and screen them against applicable sanctions lists; and
• the AML regulations now require financial service providers to have procedures to ensure compliance with relevant targeted financial sanctions obligations, and identifying assets subject to applicable targeted financial sanctions.