August 20, 2019

Provision of virtual asset services now formally subject to Cayman’s AML regime

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By Matt Taber and Daniella Skotnicki From Harneys

Matt Taber
Daniella Skotnicki

Under recent changes to the Cayman Islands Proceeds of Crime Law, the provision of virtual asset services is now formally recognised as “relevant financial business”. Any entity that carries out relevant financial business must ensure that it complies with the Proceeds of Crime Law and the Anti-Money Laundering () Regulations.

This means that all virtual asset service providers must fully comply with Cayman’s AML rules, including implementation of comprehensive AML policies and procedures, training of employees and appointment of AML compliance and reporting officers.

What are virtual assets and virtual asset service providers?

The definition of virtual assets is intentionally broad and taken from the Financial Action Task Force (FATF) guidance on virtual assets and virtual asset service providers which can be found here. Virtual asset service providers include exchanges or, possibly more accurately, market places that enable virtual assets and fiat currencies to be exchanged with one another and therefore include crypto/crypto exchanges. They also include any business that provides the services of transferring virtual assets or safekeeping and/or administration of virtual assets or the instruments enabling control over virtual assets such as crypto custodians.

What is the impact on virtual asset exchanges?

All Cayman-based virtual asset exchanges, to the extent that they haven’t already done so, are now explicitly required to comply with Cayman’s AML rules.

We have been advising clients that have been looking to form crypto exchanges or market places for some time that they should conduct their businesses in compliance with Cayman’s AML regime and as a result this new requirement will likely not present additional regulatory burden to those businesses. However, for those that have simply chosen to avoid any form of oversight on the basis that they weren’t conducting a fiat/crypto business, this may well be terminal.

What is the impact on virtual asset service providers generally?

In our experience, the activities of most Cayman virtual asset service providers, whom we have advised, already fall under the definition of relevant financial business as they are providing value transfer services and accordingly they should be conducting their business in compliance with Cayman’s AML rules. For those that are not doing so, this recent amendment ensures that compliance is now mandatory for the entire industry.

This change demonstrates the Cayman Islands Government’s commitment to having an AML regime that continuously seeks to ensure effective supervision of the ever changing financial services industry in the Cayman Islands and adheres to global standards recommended by the FATF.

Harneys’ Regulatory team is well versed in all aspects of Cayman’s AML requirements, so please contact your usual Harneys contact if you would like advice on compliance with the AML regime in Cayman. If you have any other questions, visit harneys.com/Cayman.

SOURCE: https://www.harneys.com/insights/provision-of-virtual-asset-services-now-formally-subject-to-cayman-s-aml-regime/

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