Statement - Delegation of AML CFT Obligations (2017-10-17)

Summary

This is a public statement issued by the Cayman Islands Monetary Authority (CIMA) in October 2017 clarifying how Section 3.62 of the Guidance Notes on the Prevention and Detection of Money Laundering and Terrorist Financing should be interpreted regarding delegation of AML/CFT obligations. It addresses situations where a Cayman-licensed or registered firm delegates AML/CFT-related functions to a service provider in a Schedule 3 country, who in turn sub-delegates to a further service provider located outside Schedule 3 countries.

• Schedule 3 equivalency limit: CIMA clarifies that Schedule 3 equivalency (a simplified due diligence mechanism available for delegation to firms in approved Schedule 3 jurisdictions) cannot be relied upon by sub-delegates operating in non-Schedule 3 countries.
• Full compliance required: Such sub-delegates are instead expected to comply fully with Cayman Islands AML/CFT requirements, including the Guidance Notes, the Money Laundering Regulations (2013 Revision), and the Proceeds of Crime Law, 2008.
• Higher risk noted: CIMA notes that delegates in non-Schedule 3 countries are inherently higher risk and urges stakeholders to exercise increased caution.
• Ultimate responsibility: The statement reminds all persons conducting relevant financial business that they remain ultimately responsible for the AML/CFT compliance of their delegates and sub-delegates, regardless of where those parties are located.

This is an interpretive/guidance statement rather than a new binding rule, though it reinforces existing regulatory expectations under the Guidance Notes.

Key obligations

• Persons conducting relevant financial business remain ultimately responsible for their delegates' and sub-delegates' discharge of AML/CFT obligations
• Delegates are strongly encouraged to inform sub-delegates domiciled in non-Schedule 3 countries that those sub-delegates must comply with all AML/CFT obligations under the Cayman Islands Guidance Notes, Money Laundering Regulations (2013 Revision), and Proceeds of Crime Law, 2008
• Sub-delegates operating in non-Schedule 3 countries may not rely on Schedule 3 equivalency mechanisms and are expected to comply with full Cayman AML/CFT requirements

Applies to

licensees, registrants, persons conducting relevant financial business