Industry Update: New CIMA AML and Sanctions Obligations

How JTC can help rule on effective compliance programme for the prevention and detection of money laundering, terrorist financing and proliferation financing rule on compliance with financial sanctions and targeted financial sanctions

Overview

The Cayman Islands Monetary Authority (CIMA) initiated a public consultation on 6 February 2026, seeking industry input on two transformative rules:

• Rule on Effective Compliance Programme for the Prevention and Detection of Money Laundering, Terrorist Financing, and Proliferation Financing for Financial Services Providers
• Rule on Compliance with Financial Sanctions and Targeted Financial Sanctions

The consultation period is open until 9 March 2026. These proposed rules mark a significant enhancement in the expectations for all Cayman-domiciled investment entities and funds regarding AML, CFT, CPF, and sanctions compliance.

JTC Compliance Support

JTC has completed a comprehensive review of the Private Sector Consultation Paper (PSCP) including the full text of both proposed rules. The principal regulatory developments and revised or heightened CIMA expectations are summarised below.

The new CIMA rules set out a series of clear, enforceable obligations for investment funds, including mutual and private funds. JTC has conducted a comprehensive review of the CIMA consultation papers and rules and to help you proactively enhanced your Cayman AML/CFT/CPF/Sanctions programme accordingly.

Key Areas Requiring Client Action:

AML Governance and Appointment of AML Officers

• CIMA requires explicit written evidence regarding the appointment, authority, competence and independence of AML Officers (AMLCO, MLRO, DMLRO); this must be formally documented, Board-approved and reviewed periodically.

Risk Assessment Framework

• A documented, Board-approved risk assessment must be undertaken and updated at least annually and upon material change, covering money laundering, terrorist financing, proliferation financing and sanctions risks. Methodologies must include effectiveness testing.

Policies, Procedures and Effectiveness Review

• Policies/procedures should be updated promptly after legislative or regulatory developments. Periodic effectiveness reviews and/or audits should be conducted, with findings, corrective actions and Board approval formally documented.

Training and Employee Screening

• Comprehensive, annual AML/CTF/CPF and sanctions training is required for all relevant personnel, including staff, directors, officers and contractors/administrators. “Fit and proper” screening and ongoing suitability reviews must be established for sensitive functions.

Sanctions Programme and Reporting

• Expand the sanctions programme to address periodic and trigger-event screening, asset freezing, reporting (including to FRA and the Governor), procedures for delisting and asset unfreezing, and the process for license applications for asset release. Internal logs of screening outcomes, including hits and false positives, must be maintained and available for CIMA inspection.

Application of Proportionality Principle

• The compliance programme should be formally risk-based and proportionate to the Fund’s size, complexity, and risk profile, but must not fall below statutory or regulatory minimums.

Handling Conflicts between Guidance and Rule

• CIMA-issued, enforceable rules must take precedence over guidance, with policy updated immediately in the event of any conflict.

Documenting Evidence of Compliance and Reporting

• Evidence of all compliance activities (risk assessments, reviews, screenings, reports, logs for PEPs, declined business, Competent Authority requests, SARs, audit follow-ups) should be maintained centrally and readily available for CIMA review.

Independent AML Audit Function

An independent AML audit must be conducted at least once every three years. While self-assessment may take place in the interim years, the third-year review must be conducted externally, with independent reporting.

Group-Wide and Outsourcing Responsibilities

• The fund’s compliance responsibilities extend across the group, including affiliates and branches, and cannot be contracted away. Material outsourcing arrangements (including administrators) and changes must be promptly notified to CIMA.

Simplified Due Diligence (SDD) Documentation

• Where SDD is used, a clear, documented justification and supporting risk assessment are required, with supervisory oversight.

Immediate Action for Regulatory Events

• The policy should clearly state the need for immediate (“without delay”) escalation and reporting for sanctions alerts, asset freezing/unfreezing, SARs and notifications to CIMA, the FRA, or the Governor.

Annual Compliance Calendar and Reporting

A compliance calendar must be maintained reflecting all key deadlines, including a new requirement:

• All regulated financial service providers must produce and file an annual AML/CTF/Sanctions Programme Effectiveness Audit Report with CIMA by 15 September each year.
• Note: This is a new obligation for funds (mutual funds, private funds, etc.), which have not previously been required to file a stand-alone “Annual AML Return” (as is required for banks or insurers).
• The new rule will require annual internal scheduling, responsibility assignments for report/audit completion, and responsibility for timely CIMA filing.

Recommended Immediate Actions for Consideration

• Review your AML/Sanctions/Governance programme against the new CIMA obligations
• Schedule Board review and formal approval of updated policies and controls
• Map out and document your independent AML audit cycle and new annual regulatory report requirements
• Confirm your entity’s logs, systems, and incident escalation and reporting arrangements meet CIMA’s new standards
• Monitor CIMA’s final rules publication and prepare for ongoing enhancements

JTC’s Dedicated Support

JTC can support Cayman Islands investment funds, including mutual funds, private funds, and other structures in meeting the increasing demands of AML/CFT/CPF and sanctions compliance. As CIMA continues to raise expectations, all Cayman-domiciled investment entities are required to implement and maintain a robust, Board-approved compliance programme.

JTC’s team of qualified and experienced professionals possesses deep expertise in Cayman Islands regulations and is well-positioned to help you develop, enhance and maintain a strong and compliant AML/CFT/CPF and sanctions framework.

JTC’s specialist team of Cayman AML professionals stands ready to:

• Conduct full gap analyses of your current programme
• Design and enhance policies, procedures, and effectiveness reviews
• Support Board approvals, regulatory submissions, and independent AML audits
• Serve as independent AMLCO/MLRO/DMLRO or provide ongoing advisory services

For tailored assistance and to discuss how JTC can partner with your fund or structure to achieve and demonstrate compliance, please contact Clay Dupuy