2022 Review of TCSPs Compliance with AMLRs – Sanctions Screening Policies and Procedures (2023-07-27)

Summary

This CIMA supervisory circular reports the findings of the Authority's 2022 onsite inspection review of Trust and Corporate Services Providers (TCSPs) regarding their compliance with targeted financial sanctions (TFS) screening obligations under the Anti-Money Laundering Regulations (AMLRs) and AML Guidance Notes. It reviews 23 TCSPs and 529 client files, comparing results to the 2021 review, and finds general improvement in policy adequacy and implementation but continuing weaknesses.

• Documentation of screening results: Continuing weaknesses were found in documenting screening outcomes.
• Timely onboarding screening: Deficiencies remain in performing TFS screening promptly at client onboarding.
• Ongoing monitoring and periodic review: Weaknesses persist in ongoing monitoring and periodic review screening.

The circular does not create new rules but restates existing AMLR obligations, notably Regulations 5(a)(v), 5(a)(viiia) and 5(a)(viiib), and directs all TCSPs, and more broadly financial service providers, to review and remediate their TFS compliance frameworks in light of the deficiencies identified. It reminds firms that failure to comply with TFS requirements is a criminal offence and that CIMA can impose requirements or take enforcement action against firms with inadequate systems and controls, noting that 32 requirements were issued to TCSPs following the 2022 inspections, most since completed.

• Documented evidence of screening: Maintain documented evidence of screening at onboarding and on an ongoing basis.
• Scope of screening: Screen all clients and associated parties against applicable TFS lists.
• Alert resolution: Resolve and document alerts and false positives in a timely manner.
• Compliance Reporting Forms: File Compliance Reporting Forms with the FRA where there is a true match.
• Suspicious Activity Reports: Consider filing Suspicious Activity Reports where appropriate.
• Training and programme review: Provide periodic TFS-related staff training and compliance programme reviews commensurate with the business's nature, size and complexity.

Key obligations

• TCSPs (and FSPs generally) must maintain AML/CFT/CPF and TFS policies and procedures that adequately provide for TFS screening of clients and associated parties at onboarding, per Regulation 5(a)(v) and 5(a)(viiib) of the AMLRs.
• TCSPs must maintain procedures for ongoing monitoring of business relationships and periodic TFS screening, including screening upon updates to TFS lists, per Regulation 5(a)(viiia) of the AMLRs.
• TCSPs must screen all clients, existing and new, and all associated parties (beneficial owners, directors, signatories, protectors, etc.) against all TFS lists applicable to the Cayman Islands, both at onboarding and on an ongoing basis.
• TCSPs must document and retain evidence of TFS screening results, including alert resolution (true/false positive matches), on client files.
• TCSPs must keep track of all applicable TFS lists and their updates to ensure existing customers are not designated persons.
• Where a true match or suspicion arises, TCSPs must file a Compliance Reporting Form with the Financial Reporting Authority and consider filing a Suspicious Activity Report, documenting the rationale for actions taken.
• TCSPs subject to CIMA-issued requirements following inspections must remediate identified deficiencies within the prescribed timeframes monitored by the Authority.
• TCSPs should provide adequate TFS-related training to staff and periodically assess their AML/CFT/CPF and TFS compliance programmes for adequacy relative to the nature, size and complexity of their business.

Applies to

Trust and Corporate Services Providers (TCSPs), financial service providers (FSPs)