Unregulated investment funds and some insurance entities in the Cayman Islands have been given a grace period until 31 May 2018 to establish anti-money laundering compliance programs under amended legislation that has just been passed by the Cayman Islands Government.
This transitional period is a welcome move by the Government, in particular for unregulated investment funds such as private equity funds which were not previously expressly bound by the preceding regulations and some of which may not currently have compliant anti-money laundering and countering the financing of terrorism (AML/CFT) policies and procedures in place.
Until earlier this year (as we noted in our earlier update), unregulated investment funds (which includes closed ended investment funds or 'private equity' funds) had not explicitly been caught by the Cayman Islands Proceeds of Crime Law and the Anti-Money Laundering Regulations (the AML Regulations). Under the new legislation, the list of activities which are classed as relevant financial business in or from the Cayman Islands (RFB) has been expanded to include an entity that is "otherwise investing, administering or managing funds or money on behalf of other persons", bringing the classification in line with the FATCA1 and CRS2 definitions of an investment entity and specifically including unregulated investment funds. Investment funds which are regulated under the Mutual Funds Law were, and remain, classed as conducting RFB and so are required to comply with AML/CFT legislation. The RFB list also now includes "underwriting and placement of life insurance and other investment related insurance".
Updated guidance notes3 are expected to be adopted later this year. These will include sector specific guidance for all businesses required to comply with the AML Regulations. We will issue further client updates once the revised Guidance Notes are in effect.
1 The US Foreign Account Tax Compliance Act, the intergovernmental agreement between the United States and the Cayman Islands and the Cayman Islands Tax Information Authority (International Compliance) (United States) Regulations (as revised)
2 The OECD sponsored Multilateral Competent Authority Agreement and certain bilateral agreements or tax treaties regarding the common reporting standard on automatic exchange of information the Tax Information Authority (International Tax Compliance) (Common Reporting Standard) Regulations (as revised)
3 Guidance Notes on the Prevention and Detection of Money Laundering and Terrorist Financing in the Cayman Islands (Guidance Notes)
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