CAYMAN ISLANDS Law and Practice Contributed by: Christie Walton, Patrick Rosenfeld and Philip Dickinson, Maples Group
and a fund annual return within six months of their financial year-end. Private Funds A private fund is any company, unit trust or partnership (wherever established) that offers or issues or has issued investment interests, the purpose or effect of which is the pooling of investor funds with the aim of enabling inves - tors to receive profits or gains from such entity’s acquisition, holding, management or disposal of investments, where: • the holders of investment interests do not have day-to-day control over the acquisi - tion, holding, management or disposal of the investments; and • the investments are managed as a whole by or on behalf of the operator of the private fund, directly or indirectly, but this does not include certain licensed or registered persons or any non-fund arrangements. Global Fund Regulation Concerns: International Co-Operation, Fund Manager Domicile Requirements and AML Arrangements CIMA has wide-ranging powers in respect of Cayman Islands entities that are regulated as mutual funds or private funds in the jurisdiction. CIMA has worked alongside overseas regulators in regulatory investigations involving investment funds, including the US Securities and Exchange Commission and the UK’s Financial Conduct Authority. There is no requirement for the investment man - ager or manager of a fund to be domiciled in the Cayman Islands or for a non-Cayman Islands manager or investment manager to be regulated in the Cayman Islands. Most fund managers are not domiciled in the Cayman Islands.
The Cayman Islands continues to adopt and embrace international best practice approach - es for anti-money laundering (AML) and com - batting terrorist and proliferation financing. The AML regime covers a wide range of investment entities, including all types of investment funds (whether regulated or not) in the Cayman Islands. All investment entities are required to appoint experienced risk and compliance professionals with specific knowledge of the Cayman Islands AML regime to the roles of anti-money launder - ing compliance officer (AMLCO), money launder - ing reporting officer (MLRO) and deputy MLRO. The AMLCO, in particular, will assist the invest - ment entity in ensuring compliance with relevant requirements and, where the investment entity looks to rely upon a third party for carrying out AML/KYC checks on investors, the AMLCO will likely take a lead role in assessing the suitability of that third party. The AML regime requires the operators of investment entities, together with their AMLCO, to carry out a risk-based due dili - gence exercise when assessing the suitability of a service provider or a transaction counterparty and that this exercise should be tailored to the risk profile of each investment entity (taking into account its investor base and its anticipated investment activities). This continues to be a rap - idly evolving area and the importance of retain - ing specialist risk and compliance professionals continues to rise. The increasing compliance burden – not just in the Cayman Islands, but globally – has led to a sharp increase in outsourced administration and/or compliance services among closed- ended investment entities. Outsourced service providers are increasingly acting as a “one-stop shop” for compliance solutions where expertise and scalable data can result in marked increases in compliance efficiency.
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