One of the hottest topics recently has been changes around the Cayman AML Regulations and Ingrid Pierce discusses enhanced Anti-Money Laundering Regimes on page 12 of the Wells Fargo Prime Services, Business Consulting Group's Industry and Regulatory Update Quarterly, dated July 2018.
It seems as though everyone is getting hot under the collar about AML. That is, new and improved regulations and guidance on anti-money laundering and counter-terrorist financing. As well they should. In addition to the obvious requirement that those conducting relevant financial business ought properly to know their customers and apply the appropriate level of due diligence to those with whom they do business, managers operating in multiple jurisdictions must take into account cross-border issues and determine how best to navigate the rules in each jurisdiction.
One option is to adopt a jurisdiction by jurisdiction approach. Executed correctly, this will enable a business to operate to the standards of the relevant jurisdiction and not undertake more than is required in any given circumstance.
For most businesses however, this can be an onerous and costly task which requires a careful gap analysis and ongoing monitoring of the changes taking place in each jurisdiction. An alternative approach which is equally effective and may be easier to administer, is to apply a global standard across all jurisdictions, operating to the highest requirements across the board. This would also fit with the recommendation of the Financial Action Task Force for financial institutions. While easier to adopt, in practice this may trigger organisational changes to the way in which work is done and could have the effect of creating new roles and responsibilities which may not technically be required, but need to be implemented to achieve the 'one standard' approach. There is no easy answer to this and much will depend upon the nature and size of the business, the level of existing infrastructure and the capacity of internal resources with sufficient seniority and experience in the relevant regulatory compliance area.
Those conducting relevant financial business in the Cayman Islands will be aware of recent revisions to the Anti-Money Laundering Regulations, 2017, codifying a risk-based approach. In adopting such an approach, private equity funds and hedge funds must identify, assess and understand the AML risks in relation to their respective customers and the geographical area in which such customers reside or operate. While there are specific requirements in relation to record keeping, training of staff, reporting suspicious activity and maintaining internal control procedures, the risk-based approach means that no one size fits all. It may therefore be entirely appropriate for funds to adopt quite different policies and procedures, depending on their overall business and customers.
This report is originated, owned and edited by Wells Fargo Prime Services, Business Consulting Group and is provided for general informational purposes. Walkers involvement was as a guest contributor and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations. ©2018 Wells Fargo. All Rights Reserved.
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