Designation/ appointment of MLRO, DMLRO and AMLCO for funds and investment entities

In late 2017 the Cayman Islands issued an amended Proceeds of Crime Law (“AML LAW”), Anti-Money Laundering Regulations and updated AML Guidance Notes (together “the Cayman AML
Rules”).

Under the Cayman AML Rules, the scope of entities that are captured as Relevant Financial Businesses (”RFBs”) increased to include not just Cayman Islands Monetary Authority (“CIMA”) registered and licensed funds, but other funds and investment entities falling into the definition of Relevant Financial Business, under the AML Law, Schedule 6.

In April 2018, CIMA in response to industry’s request for clarification on matters prescribed in the Cayman AML Rules confirmed the requirement for RFBs to designate natural persons, at managerial level, to act as its Anti-Money Laundering Compliance Officer (AMLCO), Money Laundering Reporting Officer (MLRO), and Deputy Money Laundering Reporting Officer (DMLRO).

On July 19th, 2018 the Cayman Islands Monetary Authority (CIMA) released a list of FAQs focusing on the requirement for all relevant financial businesses (RFB) in the Cayman Islands to appoint an Anti-Money Laundering Compliance Officer, Money Laundering Reporting Officer, and Deputy Money Laundering Reporting Officer.

The entities which are affected by the updated Cayman AML Rules include:

CIMA registered or licensed Investment Funds Non CIMA registered Investment Funds, including Private Equity, Private Debt, Real Estate and Infrastructure Funds ,‘Funds of One’ which are either closed or open ended Other entities carrying out relevant financial business in or from the Cayman Islands, such as Trading Subsidiaries, SPVs or General Partners.

Who may act as the MLRO, the DMLRO or the AMLCO?

  • Directors – both investment manager appointed and independent directors
  • Investment Manager employees (e.g. compliance officer)
  • Administrator employees
  • Other service providers

Whether acting as MLRO, DMLRO, or AMLCO, the named individuals must meet the below criteria:

  • Be a natural person at management level with the relevant knowledge, experience and expertise to act in the AML compliance capacity.
  • Have sufficient authority to be able to make recommendations to the Fund Board.
  • Have access to the necessary information and resources needed to appropriately perform the AML compliance function.
  • Be autonomous when carrying out their function.

The named AMLCO may also act as either the MLRO or the DMLRO; however the MLRO and the DMLRO must be two separate individuals.

What are the duties of the MLRO, the DMLRO and the AMLCO?

The fund, with the assistance of the AMLCO (as necessary), will carry out and document an AML risk assessment of its activities/investments and investors. Such risk assessment ought to be done prior to launch and potentially documented in the launch resolutions.

The AMLCO must:

  • Have oversight of the fund’s AML procedures and controls, both at the investor level and the investment activities.
  • Have particular responsibility for ongoing monitoring of and receiving periodic reports from delegated service providers (Investment Manager, Administrator) with AML functions, and comply with the requirements as set out within CIMA’s statement of guidance on outsourcing.
  • Provide regular reports to the board including AML recommendations.
  • Respond to requests for information by relevant authorities in a timely manner.

The MLRO and the DMLRO must:

  • Act as a centralised point of contact for all SARs and determine if SARs need to be reported to the Cayman Islands Financial Reporting Authority.

Deadline

  • Funds registering with CIMA or unregulated investment entities launching as at June 1, 2018 must designate an MLRO, DMLRO and AMLCO at the time of the registration or launch. CIMA registered funds must be able to demonstrate compliance with these requirements at the time of the submission of the registration application via CIMAs REEFS portal.
  • Funds registered with CIMA or existing unregulated investment entities prior to June 1, 2018 must demonstrate their compliance with the requirements on or before September 30, 2018. However, CIMA has extended the deadline to file the necessary information to December 31, 2018. For CIMA registered funds this is done through submission of the requisite information via CIMAs REEFS portal.

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