Managing Director for Apex Cayman, Rayal Bodden, talks to HedgeWeek about MLRO requirements in Cayman and the importance of this role for fund managers.
As global asset management groups increasingly adopt digital platforms to connect with counterparties and investors in today’s knowledge-based economy, the risks of cybersecurity threats are rising. Funds of all shapes and sizes are susceptible to fraud committed internally by employees or external criminal groups – hactivists, terrorist groups – which can have a potentially devastating impact on shareholders, oblivious to the risks. This could lead to investors losing part or all of their investment while ongoing criminal investigations and court procedures play out. As such, the Money Laundering Reporting Officer (MLRO) is becoming a vital role in the operations of investment funds.
“Criminal activity and money laundering directly affect the confidence of the marketplace and restricts fair competition, which ultimately affects investors. MLROs are one of the key crime fighters in the chain with special skills and responsibilities to protect investors, mitigate losses and bring about confidence to the market,” says Rayal Bodden (pictured), Director, Apex Fund Services.
MLROs should have in-depth training on all aspects of money laundering, legislation and how to detect criminal activity and money laundering efforts.
“Criminal activity and money laundering never sleeps so there is no room for complacency. Vigilance on ongoing training in the determination and reporting of suspicious activities and on new trends of criminal activity is a must and is often mandated by law or by the organisation’s requirements,” says Bodden.
From a regulatory perspective, the Cayman AML regime has been in place for over 15 years and includes the provision to appoint an MLRO to Cayman mutual funds. Funds may, however, meet the MLRO requirement through the appointment of a regulated third party such as their fund administrator.
Apex offers MLRO services to support boards with their responsibility of oversight for AML compliance and appropriately communicating with the Reporting Authorities, if and when necessary. “Additionally,” says Bodden, “the MLRO will liaise with service providers such as auditors where an AML issue arises. Dealing with these matters can become challenging and complex at times, which requires special consideration from persons experienced in handling these matters.”
Bodden confirms that this year the FATF will be evaluating the Cayman Islands to its own standards. “In addition to being assessed for meeting technical requirements of the FATF 40 Recommendations, the Cayman Islands will now also be measured on the effectiveness of 11 Immediate Outcomes of enforcement mechanisms. Of specific interest is the 7th Immediate Outcome which focuses on `Money Laundering offenses and activities are investigated and offenders are prosecuted and [made] subject to effective, proportionate and dissuasive sanctions.’ Tied directly to this, is the responsibility of the MLRO as the designated person in the organisation, to whom all suspicious activity reports must be made and who will act as the main point of contact with the Reporting Authority to ensure compliance,” explains Bodden.
Failure to have a dedicated MLRO in place could, in a worst-case scenario, signal the death knell of a funds business should it fail to properly identify criminal activity and money laundering.
As Bodden stresses, the advice is always the same – people and process.
“Look for experienced people and service providers with organised processes. Having sound systems in place, acting quickly on intelligence and quickly reporting to the appropriate authorities can cut perpetrators off at the pass. This ensures the best chances for investors to be protected and bad actors to get subjected to enforcement.”
Click Here to contact Apex Cayman for more information | Click Here for more details on Apex’s MLRO Services.
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