AntiMoney Laundering Regulations Cayman Islands (2020 Revision)

The Cayman Islands revised its antimoney laundering (AML) framework in 2020 to align with international standards set by the Financial Action Task Force (FATF) and to respond to evolving risks in the financial sector. The updated regulations are primarily captured in the AntiMoney Laundering Regulations (2020 Revision) and the Criminal Finances Law (CFL) 2019. This page provides an overview of the key elements, obligations for covered entities, and practical steps for compliance.

1. Scope and Applicability

The 2020 Revision applies to a wide range of persons and entities, including:

• Financial institutions (banks, trust companies, insurance corporations, investment funds)
• Designated nonfinancial businesses and professions (lawyers, accountants, real estate agents, dealers in precious metals)
• Cryptocurrency service providers
• Highvalue dealers in goods such as art, antiques or luxury vehicles
• All persons who conduct covered activities on behalf of a customer, regardless of whether they are based in the Cayman Islands.

2. Core Regulatory Obligations

2.1 Customer Due Diligence (CDD)

Covered persons must establish the identity of each customer and, where applicable, the beneficial owners. The regulation distinguishes three levels of CDD:

• Standard CDD required for most business relationships.
• Enhanced CDD (ECDD) mandatory for highrisk customers, politically exposed persons (PEPs), and transactions involving highrisk jurisdictions.
• Simplified CDD allowed only where the risk is deemed low and the customer is a public authority or a listed entity.

2.2 Ongoing Monitoring

Compliance does not stop at onboarding. Covered entities must continuously monitor transactions and update customer information at least annually, or more frequently if risk indicators arise.

2.3 Suspicious Activity Reporting (SAR)

Any suspicion of money laundering or terrorist financing must be reported to the Cayman Islands Monetary Authority (CIMA) within 30 days of detection. Reports are confidential; the subject of a SAR cannot be informed.

2.4 RecordKeeping

All records relating to CDD, transaction monitoring, and SARs must be retained for a minimum of five (5) years after the end of the business relationship or the date of the transaction.

2.5 Risk Assessment

Every covered person must conduct a written AML risk assessment at least annually, documenting the risks associated with customers, products, services, and delivery channels, and outlining riskmitigation measures.

3. Governance and Internal Controls

The regulations require a robust internal governance framework:

• AML Compliance Officer (AMLCO) appointed with sufficient authority and expertise; responsible for daytoday compliance.
• Board Oversight the board must receive regular reports on AML risk and compliance performance.
• Policies & Procedures written AML policies covering CDD, monitoring, reporting, training, and internal controls.
• Independent Audit an annual audit of the AML program must be performed by an independent party.

4. Training Requirements

All staff with AML responsibilities must receive regular training that includes:

• Legal obligations under the 2020 Revision and related legislation.
• Recognition of moneylaundering typologies and red flags.
• Procedures for reporting internally and to CIMA.
• Updates on emerging risks, e.g., cryptocurrency, virtual assets.

Training must be documented, and refresher sessions are required at least annually.

5. Specific Provisions for HighRisk Sectors

5.1 Virtual Asset Service Providers (VASPs)

VASPs are required to implement transactionmonitoring systems capable of tracing blockchain activity, maintain robust KYC on both senders and receivers, and file SARs for any suspicious cryptotransactions.

5.2 Real Estate

Agents must verify identification for both buyers and sellers, conduct sourceoffunds checks for purchases exceeding US$150,000, and report any structuring or rapid turnover of properties.

5.3 Legal Professionals

Lawyers, notaries and other legal practitioners must apply CDD when facilitating the formation of companies, trusts or other legal entities, especially where the client is a nonresident.

6. Enforcement and Penalties

CIMA has broad enforcement powers, including the ability to:

• Issue fines up to US$1 million or 5% of annual turnover, whichever is greater.
• Revoke or suspend licenses.
• Require remedial actions such as remedial training or system upgrades.
• Publicly disclose enforcement actions.

Criminal liability under the CFL can result in imprisonment of up to 10 years for moneylaundering offences.

7. Practical Steps for Compliance

8. Recent Developments and Guidance

Since the 2020 revision, CIMA has released several guidance notes covering:

• Enhanced due diligence for cryptoasset transactions.
• PEP identification using international sanctions lists.
• Best practices for onboarding nonresident clients.

Staying uptodate with these publications is essential for maintaining compliance.

9. Resources

• CIMA AML Regulations (2020 Revision)
• Criminal Finances Law 2019
• Financial Action Task Force (FATF)
• CIMA Guidance Notes

By adhering to the 2020 revision, Cayman Islands entities not only meet legal requirements but also strengthen the integrity of the jurisdictions financial system, protecting it from the abuse of moneylaundering and terrorist financing activities.