The Cayman Islands Monetary Authority (CIMA) has issued proposed new rules on anti-money laundering, counter-terrorist financing and sanctions compliance, placing clearer emphasis on governance, audit and accountability while largely codifying practices that many Cayman regulated firms already follow.
The draft rules, which are currently out for industry consultation, cover two main areas: an effective compliance programme for money laundering, terrorist financing and proliferation financing, and a standalone rule on compliance with financial sanctions and targeted financial sanctions. CIMA has invited feedback from industry before the rules are finalised.
One of the most notable areas of increased emphasis is governance. Under the proposed rules, governing bodies would be explicitly required to establish and maintain a documented AML governance framework, clearly setting out roles, responsibilities and oversight arrangements.
While the Anti-Money Laundering Regulations already require systems, controls and the appointment of an AML compliance officer, the draft rules place stronger and more direct responsibility on boards and senior management for the overall effectiveness of the compliance framework in the Cayman Islands.
The proposed rules also formalise expectations around the role of the AML compliance officer. Fitness, integrity, competence and independence requirements are set out in detail, alongside expectations around authority, access to senior management and resourcing. Although these standards have long been reflected in supervisory practice, they would for the first time be clearly articulated in binding rules.
Another significant development is the introduction of a mandatory annual independent AML audit, with the proposed change that the audit report is to be submitted to CIMA by 15 Sept. each year.
The existing regulations refer to an independent audit function but do not prescribe frequency, externalisation or reporting deadlines. The proposed rules would therefore introduce a fixed annual compliance deliverable and limit the use of internal audit functions by requiring periodic external reviews.
Training is another area where CIMA has sharpened its focus. The draft rules require a documented training plan covering staff, senior management and the governing body, together with defined scope, frequency and recordkeeping. While annual training has long been expected in practice, this expectation would now be expressly codified.
On sanctions and targeted financial sanctions, the proposed rule brings together obligations that currently sit across the AML Regulations and the Terrorism Law into a more structured and operational framework. The rule places emphasis on a standalone sanctions compliance framework, clearer screening populations, prompt rescreening when sanctions lists are updated, and defined procedures for handling false positives.
Several elements of the sanctions rule reflect existing legal obligations, particularly around the freezing of terrorist assets and reporting to the competent authorities. However, the proposed rule formalises how firms are expected to operationalise those obligations, including prescribed reporting formats, tighter timing standards and documented procedures for delisting and unfreezing assets.
CIMA has stressed that the proposals are consultative and that industry feedback via the various associations, will be taken into account in the final form of the rules.
The consultation signals CIMA’s intention to reduce ambiguity around supervisory expectations while strengthening its ability to assess and enforce compliance across the regulated sector.
The Cayman Independent has prepared an explainer which sets out a comparison of the proposed rules against existing obligations under the AML Regulations and the Terrorism Law. Look forward to it in tomorrow’s issue.
