AML FAQs for Funds (2019-02-01)

Summary

This is a CIMA guidance note in FAQ format clarifying how the Anti-Money Laundering Regulations (AMLRs) and accompanying Guidance Notes (GN) apply to Cayman Islands funds, both regulated and unregulated. It addresses recurring industry questions about the appointment of an Anti-Money Laundering Compliance Officer (AMLCO), Money Laundering Reporting Officer (MLRO) and Deputy MLRO (DMLRO), including who must appoint them, whether they must be natural persons, whether appointments are needed at the sub-fund level (for SPCs and Series Trusts), suitability/independence criteria, and whether officers can be based outside the Cayman Islands.

The document confirms that all Cayman-domiciled funds conducting relevant financial business, whether registered/licensed or unregulated, must designate a natural person at managerial level to serve as AMLCO, MLRO and DMLRO, with the MLRO and DMLRO being different individuals.

Procedural Points

Regulated funds: Must confirm these appointments to CIMA via the REEFS portal.
Unregulated funds: Do not need to notify CIMA but must still make the appointments.
SAR filing: SARs relating to Cayman funds must always be filed with the Cayman Islands Financial Reporting Authority, even if the MLRO/DMLRO is based abroad and files SARs elsewhere.

Edge Cases

SPCs: Only need one set of officers at the core company level, not per segregated portfolio.
Series Trusts: Likewise only need officers at the fund level, unless an individual trust is registered as a standalone fund.
LUT/LUL status funds: Exempt from the appointment requirement.
De-registering or winding-up funds: Funds de-registering as closed-ended funds or still actively winding up (without formal de-registration notice) remain obligated to appoint these officers.

Key obligations

A Cayman-domiciled fund (regulated or unregulated) conducting relevant financial business must designate a natural person at managerial level as its AMLCO, MLRO and DMLRO.
The MLRO and DMLRO must be two different natural persons (the same person may hold both AMLCO and MLRO, or AMLCO and DMLRO, but not MLRO and DMLRO together).
Appointed AMLCO, MLRO and DMLRO must have independence, autonomy and specific knowledge of Cayman Islands AML/CFT legislative and regulatory requirements, and the FSP must be able to demonstrate this.
Existing regulated funds must submit the requisite appointment forms for the AMLCO, MLRO and DMLRO via CIMA's REEFS portal on or before September 30, 2018.
New funds applying to register or be licensed on or after 1 June 2018 must provide the AMLCO/MLRO/DMLRO information at the time of submitting their registration/licence application via REEFS.
Any change to the information previously provided regarding the AMLCO, MLRO or DMLRO must be updated via a fresh REEFS submission.
Funds must disclose in their offering documents that an AMLCO, MLRO and DMLRO have been designated, and how investors can obtain further information about such persons.
All Suspicious Activity Reports (SARs) relating to Cayman Islands funds must be filed with the Cayman Islands Financial Reporting Authority, regardless of where the MLRO/DMLRO is based or whether SARs are also filed in another jurisdiction.
Unregulated funds must appoint an AMLCO, MLRO and DMLRO by September 30, 2018, although they are not required to confirm the appointment to the Authority.
A fund that is de-registering/cancelling its licence but continues to conduct relevant financial business (e.g. as a closed-ended fund), or that has not yet formally submitted a de-registration/cancellation application while winding up, must still appoint an MLRO, DMLRO and AMLCO.
If an individual trust within a Series Trust is established/registered as a standalone fund, it must appoint its own AMLCO, MLRO and DMLRO.

Applies to

Cayman-domiciled funds (regulated), Cayman-domiciled funds (unregulated), Segregated Portfolio Companies (SPCs), Series Trusts, closed-ended funds, funds in LUT/LUL status, Financial Service Providers (FSPs)

Deadlines

September 30, 2018: Existing regulated funds must submit the requisite AMLCO/MLRO/DMLRO appointment forms via CIMA's REEFS portal.
September 30, 2018: Unregulated funds are expected to have appointed an AMLCO, MLRO and DMLRO by this date, though confirmation to the Authority is not required.
1 June 2018: Threshold date on/after which new funds applying to register or be licensed must provide AMLCO/MLRO/DMLRO information at the time of their registration/licence application.