This guide looks at the roles and responsibilities of the nominated officers of financial service providers whose job it is to look out for and report suspicious activity and who oversee the compliance function and ensure that adequate systems and controls are in place to comply with the Anti-Money Laundering Regulations (Revised).
Money laundering is the process by which the proceeds of crime are channelled through the economy/financial system in a way which is intended to conceal the true origin and ownership of the proceeds of criminal activity. The Proceeds of Crime Act (the PC Act), the Terrorism Act and the supporting Anti-Money Laundering Regulations (Revised) (the Regulations) are the main pieces of legislation in the Cayman Islands aimed at combating money laundering, proliferation financing and terrorist financing. Under these laws, those persons carrying out "relevant financial business" (referred to as financial service providers or FSPs) must apply a risk based approach to anti-money laundering, proliferation financing and terrorist financing (together, AML) compliance.
Nominated officers - money laundering reporting officer and deputy
The PC Act requires that FSPs have a "nominated officer" in place for the purpose of receiving reports relating to criminal conduct, with the Regulations creating the roles of the Money Laundering Reporting Officer (MLRO), Deputy Money Laundering Officer (DMLRO) and AML Compliance Officer (AMLCO). Accordingly, natural persons must be appointed as the MLRO, DMLRO and AMLCO for all FSPs, including investment funds.
The Regulations and Guidance Notes on the Prevention and Detection of Money Laundering and Terrorist Financing in the Cayman Islands (and amendments) (Guidance Notes) published by the Cayman Islands Monetary Authority (CIMA) set out more details on each of these roles and functions.
Who can be appointed as MLRO?
Under the Regulations each person carrying out relevant financial business must designate a person at management level as their MLRO, to whom suspicious activity reports (SARs) must be made. The MLRO should be someone who is well versed in the business of the FSP which may give rise to opportunities for money laundering, proliferation financing or terrorist financing. A DMLRO must also be appointed to perform the MLRO's functions in their absence. The DMLRO should be a staff member of similar status and experience as the MLRO.
The Guidance Notes provide that the MLRO should:
Be a natural person
Be autonomous, meaning the MLRO is the final decision maker as to whether to file a SAR
Be independent, meaning no vested interest in the underlying activity
Have access to all relevant material in order to make an assessment as to whether an activity is or is not suspicious
What is the role of the MLRO?
The primary duties of the MRLO (or the DMLRO in their absence) are to:
Receive reports of any information or other matter which comes to the attention of a person carrying out relevant financial business, which gives rise to an actual knowledge or suspicion of money laundering, proliferation financing or terrorist financing
Consider and investigate such reports in light of all other relevant information to determine if the information or other matter gives rise to such knowledge or suspicion
Have access to other information which may assist in considering such report
Make prompt disclosures to the Financial Reporting Authority (FRA) in the standard SAR form if after considering a report there is knowledge or a suspicion of money laundering, proliferation financing or terrorist financing
Establish and maintain a register of money laundering, proliferation financing or terrorist financing reports made by staff
Maintain a register of reports to the FRA
How do we identify unusual or suspicious transactions?
As the types of transactions which may be used by money launderers are unlimited it is difficult to define a suspicious transaction. The Guidance Notes are instructive in t...