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As of February, the Cayman Islands has been ‘grey listed’ by the Financial Action Task Force (‘FATF’), citing weaknesses in the islands’ AML/CFT regime, particularly in the areas of fines and enforcement actions. FATF defines countries on their grey list as representing a higher risk of money laundering and terrorism financing but who have formally committed to working with the FATF to develop action plans that will address their AML/CFT deficiencies. In response it is anticipated that regulators will classify Cayman Islands as a ‘higher risk’ country, and will automatically fall into scope for enhanced due diligence.

As a trigger event regulated businesses in the Crown Dependencies should perform an impact assessment for any likely implications or actions necessary as a result. Specifically, regulators will require that businesses with connections to the Cayman Islands provide their supervisor with their proposed plan of action and timescales for completion of any required remediation.

As a result, we would expect regulated businesses to:

  • Formally document their impact assessment across their book of clients - even if the conclusion is that there is no exposure to the Cayman Islands;
  • Update as necessary their AML/CFT business risk assessment, and relevant policies and procedures including controls on business acceptance and ongoing monitoring;
  • Identify existing customers with connections to the Cayman Islands, including customer’s source of funds and/or source of wealth as well as associated parties, incoming and outgoing funds;
  • Apply enhanced measures and update customer risk assessment as necessary;
  • Consider existing introducers/reliance arrangements on obliged persons from the Cayman Islands;
  • Consider refreshing and/or rolling out AML/CTF training to their relevant staff to reflect these new provisions.

KPMG’s risk and regulatory specialists are available to help should you need assistance.