Regulated Mutual Funds and Mutual Fund Administrators must have policies and procedures in place as required by the Cayman Islands anti-money laundering regulations (the “Procedures”).
How Funds May Meet Their AML Obligations
Mutual Funds and Mutual Fund Administrators may meet their obligations in relation to their Procedures by either:
(1) implementing their Procedures directly;
(2) delegating the performance of the Procedures to a person; or
(3) relying on a person to perform the Procedures.
It is a general understanding that, under a delegation scenario, the delegate would usually perform the function in accordance with the financial services provider’s (“FSP”) procedures and is subject to the FSP’s control of the effective implementation of those procedures by the delegate.
Where the FSP that is a Mutual Fund or Mutual Fund Administrator chooses to delegate the performance of the Procedures to a person, the FSP should adopt the outsourcing policies referred to in the guidance notes to the anti-money laundering regulations.
It is a general understanding that a person on whom reliance is being placed would apply its own procedures to perform the function in question, which is in contrast with delegation scenario.
In a reliance scenario, an FSP will assess the AML/CFT and other relevant policies and procedures of a person (on whom the FSP intends to rely to perform the function).
Where the FSP is satisfied that the person’s policies and procedures would enable the FSP to comply with the AML/CFT obligations of the Cayman Islands, then the FSP may rely on the person to perform the function using the person’s policies and procedures.
Since the person on whom reliance is placed applies its own policies and procedures to perform the function, the FSP should ensure that the person’s policies and procedures are consistent with the FSP’s nature of business, and are adequate to comply with the applicable regulatory requirements.
Where a Mutual Fund or Mutual Fund Administrator chooses to rely on a person for the performance of the Procedures, the FSP should adopt the relevant principles referred to in the guidance notes to the anti-money laundering regulations.
Documentation of Compliance
The operators of the Mutual Funds or Mutual Fund Administrators should document, either as a board resolution or other appropriate documentation (such as a supplement/update to existing policies and procedures or detailed appendix to an existing agreement, in the case of a delegation or reliance arrangement), the manner in which the FSP has met its obligation to maintain and implement Procedures.
About the author
Alric Lindsay is a Cayman Islands corporate/funds lawyer and an independent fund director approved by the Cayman Islands Monetary Authority and licensed under The Directors’ Registration and Licensing Law. Alric also acts as voluntary liquidator to Cayman Islands entities. Alric can be contacted at firstname.lastname@example.org.