Cayman Islands - KYC Requirements Summary

Knock knock Who’s there? 2020. 2020 Who? This year has been a hard and interesting year for all. With Covid-19 dominating the news, many have seen their lives transformed. In the flurry of lockdowns, and restrictions being lifted, the financial cogs of the world have been quietly turning. As our attention has been shifted to the harsher realities of 2020, important events have taken place in the KYC world. One of which has been the recent amendments made by Cayman Islands Monetary Authority (CIMA) to their Anti-Money Laundering (AML) Regulations.

Many of us know the Cayman Islands as a significant offshore tax-heaven; but not often are the regulatory requirements discussed with respect to such jurisdictions. This article aims to provide a summary of the current Know Your Customer (KYC) requirements with respects to the Cayman Islands: 1) Equivalence: Formerly a consideration in determining whether or not it was appropriate to apply simplified due diligence on a given applicant, CIMA published a list from the Cayman Islands Anti-Money Laundering Steering Group (commonly referred to as the "Equivalent Jurisdiction List"). Since 5 August 2020, the Equivalent Jurisdiction List is no longer a factor, and instead, the jurisdiction of the applicant for business will need to be assessed by the Cayman Islands’ financial service provider or its AML/Combating the Financing of Terrorism (CTF) service provider. 2) Risk Based Approach: In line with many jurisdictions [1], especially those domiciled within the European Union (EU), the risk-based approach is applied to all entities. A person carrying out relevant financial business transactions should take steps appropriate to the nature and size of the business to identify, assess, and understand its money laundering and terrorist financing risks in relation to the following:

A customer of the person; The country or geographic area in which the customer resides or operates; The products, services, and transactions of the person; and The delivery channels of the person [2]. 3) General Requirement of the CDD: Customer due diligence (CDD) is required, (in line with EU standards), for the following, when a person/company is: Establishing a business relationship; Carrying out a once-off transaction valued more than ten thousand dollars, including a transaction carried out in a single several operations of smaller value that appear to be linked; Carrying out a once-off transaction as a wire transfer; Suspected of money laundering or terrorist financing; or Doubtful about the veracity or adequacy of previously obtained customer identification data [3]. 4) Beneficial Ownership: The AMLRs stated by CIMA require identification and verification of beneficial owners of legal persons at a threshold of 10%, unless simplified due diligence is applicable. For current purposes, in the case of a legal person, (other than a company whose securities are listed on a recognised stock exchange), 10% or more of the capital and/or voting rights of a legal person have to be identified. 5) Sanctions: The AMLRs now include specific reference to having procedures for ensuring compliance with targeted financial sanctions obligations applicable in the Cayman Islands and identifying assets subject to applicable targeted financial sanctions. EU and UN applicable sanctions lists are extended to the Cayman Islands by UK statutory instrument. 6) Politically Exposed Person (PEP) Classification: CIMA states that in line with EU standards, PEPs must be identified and accordingly escalated as part of the review process, (for further details, the AMLRs give specific definition and treatment of PEPs). Risk management systems must be put in place to determine whether a person/beneficial owner is a PEP or has a business relationship with a PEP, family member, or close associate. The regulation also states that reasonable measures must be taken to establish the source of wealth/funds of a person for the latter as well as continuous monitoring of their associated risk (please see the ongoing monitoring section below). 7) Ongoing Monitoring: Financial service providers shall continue to have an ongoing obligation to monitor the adequacy of previously obtained KYC against current requirements. Accordingly, existing customers should be reviewed in the ordinary course of such ongoing monitoring.

The provider should ensure that documents, data, or information collected under the customer due diligence process is kept up to date, by reviewing existing records at appropriate times, considering  whether and when customer due diligence measures have been previously undertaken, particularly for higher risk categories of customers[4]. How Can Lysis Help? No matter the size of the firm, Lysis Financial has the relevant experts and teams to help. We have a wide range of services, which includes our Consulting Team and AML Operations Centre. Our services include: - Managed Service Support: providing services such as Client Onboarding, KYC refresh and remediation or Client Classification (MiFID, FATCA, or even jurisdiction specific guidance, such as the Cayman Islands). Not only are we able to offer this to financial institutions, but also Real Estate and Digital Currency firms; - Transaction Monitoring Services: Provision of experienced and full trained AML Transaction Monitoring resources as well as technology adoption and implementation support; - AML Screening & On-Going Monitoring Support: Screening and ongoing monitoring of the firm’s clients and suppliers against domestic and international sanctions lists, PEP lists, and adverse media[5]; and - Consulting & Advisory: Lysis Financial delivers expert consulting in Anti-Money Laundering (AML), AML Reviews and Maturity Assessments, policies and procedures and preparation for regulatory visits and regulatory remediation, both within the domestic and international markets. For more information please visit our website: By Lauren Parmenter, Senior Consultant at Lysis Group [1] [2] Anti-Money Laundering Regulations (2020 Revision) [3] Anti-Money Laundering Regulations (2020 Revision) [4] Anti-Money Laundering Regulations (2020 Revision) [5]

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