CIMA’s Continued Focus on AML

The Cayman Islands Monetary Authority (“CIMA”) has made significant changes to its Anti-Money Laundering (“AML”) regulations in recent years, including updating the definition of Financial Service Provider (“FSP”) making private investment vehicles, such as hedge funds, private equity funds, and real estate funds domiciled in Cayman Islands, subject to Cayman Island’s AML regime.

CIMA requires FSPs to, among other things, designate an AML Compliance Officer, an AML Reporting Officer, and Deputy AML Reporting Officer; adopt risk-based policies and procedures that include customer and investor due diligence (“CDD”); monitor and report suspicious activity; implement systems to identify money laundering and terrorist financing risks relating to persons, countries and activities which include checks against all applicable sanctions lists; establish an appropriate employee training program; maintain record keeping procedures; and conduct a periodic audit function to test AML systems. 

Private fund sponsors may rely on or delegate most AML functions and responsibilities to related or third-party service providers, such as internal or external administrators. However, ultimate responsibility to meet these regulatory responsibilities rests on the private funds, which are expected to conduct comprehensive due diligence and oversight of the third parties’ AML programs. Fund managers have likely implemented the necessary procedures since the regulations were released in December 2017, however, firms should consider whether an appropriate independent review of the AML program was conducted. 

How ACA Can Help

ACA Compliance Group (“ACA”) works with managers and private funds to ensure they meet the requirements of applicable US and Cayman Islands AML regulations. ACA assists with the establishment of a risk-based, tailored AML programs for private funds and their managers, particularly those with AML functions carried out in-house. ACA also conducts independent tests of managers and funds’ AML programs to meet regulatory requirements or industry best practices.
 
In addition, ACA helps with investor identification and risk assessment that meet CDD requirements established by CIMA regulations. ACA helps in key aspects of these requirements including conducting identity validation of investors with documentary and non-documentary verifications, including those for beneficial owners and control persons, checking against sanctions and high-risk databases, and carrying out ongoing investor monitoring.
 
As a leading provider of risk management and technology solutions focused on regulatory compliance, financial crime, cybersecurity and performance, and with hundreds of successful SEC, NFA, and FINRA registrations over our 17 years in business, ACA is in a great position to ensure your firm stays out of the regulatory cross hairs.   

For More Information

For more information on our solutions and services for advisers to private funds, please contact our team here.