The Cayman Islands has introduced a number of important amendments to its Anti-Money Laundering (AML) regulation, following recommendations made by the Caribbean Financial Action Task Force (CFATF) in last year's mutual evaluation report on the jurisdiction's AML regime.
The biggest change is the abolition of the 'equivalent jurisdiction list': From 5 August 2020, the Equivalent Jurisdiction List will no longer be a factor, and instead, the country of the applicant for business will need to be assessed by the Cayman Islands financial services provider or its AML/CFT service provider as having a low degree of risk of money laundering and terrorist financing. This country risk assessment will need to be recorded on the customer file, Maples law firm highlights.
The 10% beneficial ownership threshold is now also in effect. The regulations require identification and verification of beneficial owners of legal persons at a threshold of only 10%, unless simplified due-diligence is applicable. Although the threshold in many jurisdictions of service providers that carry out AML functions for Cayman Islands entities is 25%, the Cayman Islands Monetary Authority has now made clear that there is no basis for deviating from the statutory 10% threshold for corporate entities and partnerships. The jurisdiction's legislation implementing the Common Reporting Standard has also set the 10% threshold for 'controlling persons' for some time.
The know your customer (KYC) confirmations provided by an eligible introducer must now list the applicant for business being introduced, and (for non-natural persons) their beneficial owners. Financial service providers must monitor the relevant customers and beneficial owners and screen them against applicable sanctions lists. "It should be borne in mind that the scope and purpose of eligible introductions is to streamline KYC at the point of onboarding of customers who have already been vetted by an appropriately regulated party," Maples said.
Finally, the AML regulations now require financial service providers to have procedures to ensure compliance with relevant targeted financial sanctions obligations, and identifying assets subject to applicable targeted financial sanctions.
Following Brexit, it is possible that in the future the Cayman Islands will adopt EU sanctions lists directly. In any event, customers of Cayman Islands financial services providers need to be monitored against EU, UK and UN lists.