As the Legislative and Regulatory bodies attempt to keep up with the explosion in the digital asset space by implementing Virtual Asset, DATA Protection and Anti-Money Laundering Laws, to name a few, it is clear that most funds cannot keep head above water as the demand for anti money-laundering /compliance officer specialists continue to grow. To adhere to the laws, regulations and standards, costing and scaling have become an immense issue for many entities – from the appointment of Directors to Cayman Anti-money Laundering Officer /Compliance Officers (AMLRO/CO) and even now Data Reps, all to be hosted inhouse. Traditionally this amounts to the employ of numerous individuals who are experts only in their respective fields, thereby leaving the fund with some population and liquidity issues.
The catch 22 is where funds do not comply with the legislation and regulation promulgated, i.e. recommended appointment of a AML CO, heavy fines, sanctions and even in some cases jail time might be imposed. With regulating bodies and authorities waiting for funds to let one slip, the funds are attempting to mitigate risk and find that financial sweet spot by turning to independent Cayman AMLRO/CO firms. As all eyes are now on the emerging sector of independent service providers, the question begs, who do you appoint and what do you look for when you do not know how deep the well is in the digital asset compliance and regulatory space.
With the Cayman Islands falling within the Caribbean Financial Action Task Force (CFATF) jurisdiction we must comply with the FATF Standards, as such, a starting point will be to look for an independent firm who is qualified and well versed in the laws, regulations and standards. This is very important as it is not only the Cayman AMLRO/CO that carries liability here. When the skillset box is checked it is time to move on to the vetting of the services. In essence when shopping for an independent Cayman AMLRO/CO it is important to vet credentials together with experience and service offering
Most Cayman AMLRO/CO come either form a financial (audit) or legal background with further specialist compliance and AML training through accredited institutions such as ICA, ACAMS or C4. Looking deeper within the well, it is not only the accreditation that must be in place but also the experience in the drafting of compliance policies, procedures and manuals that are specific to your organization.
A bonus is if the Cayman AMLRO/CO have a good working relationship with the regulatory bodies as they will be the face of your institution when the fund has to file reports or account for not doing so. When looking at the practical side of things, being tech savvy and the ability to provide training is a must as the officer will be responsible for training stakeholders within the fund.
Your Independent Cayman AMLRO/CO should tailor a risked based approach grounded on the three lines of defense, Business (applying controls), Compliance (monitoring) and Audit (internal and external). To test the salt, make sure that the Cayman AMLRO/CO performs an initial review of the current system, if any, to provide possible cures and remedies before moving to the design phase. When confronted with the policies, procedures, and manuals, ensure that they address the risks that your organization might possibly face through your product/service offering i.e., high volumes of transactions or funds sourced from possible PEP’s.
From a tech perspective, a point of departure is to ensure that the API used for checks in CDD, ML, TF, PF and PEP screening is renowned and covers known sanction lists /adheres to the approach and regulations of your jurisdiction. Should your Cayman AMLRO/CO provide you with an inhouse solution – proceed with caution, not all independent solutions have been properly vetted.
Two major points you cannot let slip are statutory reporting through filing of SARs and the implementation of regular internal and external compliance audits. Then request that proper record keeping is adhered to and that all data is processed safely. Lastly, training, training and training – it does not help your fund if all the manuals are to the T, but your staff does not know, follow and implement same.
It is more clear than ever that the role of the Cayman AMLRO/CO is one of a specialist compliance practitioner, who is both tech savvy and coolheaded to protect the fund from risk and subpar governance. With all eyes on you to comply with the laws, regulation and standards, bringing in an independent Cayman AMLRO/CO may significantly reduce your own administrative, compliance and cost burden. The independent officers come with a full set of hybrid skills that can only add value to your organization and optimize compliance activities whilst mitigating risk.
As there is seldom one person in your firm or fund that can adhere to all the compliance and regulatory requirements it perhaps is time fill the gap and consider appointing an independent Cayman AMLRO/CO. Feel free to have a look at our services or to contact us to set up a free initial consultation.
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