‍Cayman Fund AML Requirements: What Managers and Allocators Need to Know

‍Why AML matters for Cayman funds

Cayman remains the leading domicile for hedge and digital-asset funds, but with that stature comes stringent anti-money laundering (AML), counter-terrorist financing (CFT) and counter-proliferation financing (CPF) obligations. Regulated mutual funds and private funds are expected to implement a risk-based AML framework aligned with CIMA’s Guidance Notes and the Anti-Money Laundering Regulations (AMLRs).  

The core AML framework for funds

1) Appoint three AML Officers

Every Cayman fund must appoint natural persons as:

• AML Compliance Officer (AMLCO) – oversees the AML program, testing, and remediation
• Money Laundering Reporting Officer (MLRO) – receives and assesses internal suspicious activity reports; interfaces with the Financial Reporting Authority
• Deputy MLRO (DMLRO) – acts when the MLRO is unavailable

These roles can be outsourced to qualified providers, but the fund and its operators retain ultimate responsibility.  

2) Documented, risk-based policies and procedures

Funds must maintain proportionate AML/CFT/CPF policies covering: governance, risk assessment, onboarding, ongoing monitoring, sanctions screening, record-keeping, training, reliance/outsourcing, and independent testing. CIMA’s Guidance Notes set the benchmark expectations across all financial service providers.  

3) Customer due diligence (CDD) and KYC

Before establishing a business relationship or processing a one-off transaction, a fund must conduct CDD on investors (and controllers/beneficial owners), apply enhanced due diligence where risks are higher (e.g., PEPs, complex structures), verify source of funds/wealth where appropriate, and screen against applicable UN/UK sanctions lists. Ongoing monitoring is required throughout the lifecycle of the relationship.  

4) Ongoing monitoring and suspicious reporting

Managers and administrators must monitor subscriptions/redemptions and transactional patterns to identify anomalies. The MLRO/DMLRO must maintain SAR processes and liaise with the FRA where warranted.  

5) Independent audit (testing) of the AML function

AMLRs require an effective risk-based independent audit function to test the adequacy and effectiveness of the AML program. Findings should be reported to the board/operators with remediation tracked to completion.  

6) Training and awareness

Directors, officers, employees, and relevant service providers must receive periodic AML training appropriate to their roles, with attendance and comprehension recorded.  

7) Record-keeping

Maintain CDD and transaction records for the prescribed periods (typically at least five years after the end of the relationship or completion of a transaction), ensuring they can be produced promptly to competent authorities.  

Governance: expectations of the fund’s operators

CIMA’s corporate governance guidance for regulated mutual and private funds expects operators (directors/general partner/managing member) to oversee the AML framework, ensure resourcing is adequate, review periodic AML reports, and challenge the service providers where necessary. Minutes should evidence this oversight.  

Outsourcing & the administrator’s role

Many funds delegate onboarding and monitoring to their independent administrator. That’s permitted, but not a transfer of responsibility, the fund remains accountable for compliance, must approve the administrator’s AML policy, and should agree clear SLAs, KPIs, and reporting (e.g., hits on sanctions/PEP screening, EDD volumes, open exceptions, SAR statistics).  

Practical checklist for new (and existing) Cayman funds

• Board approves a written AML Business Risk Assessment and AML Policy/Procedures mapped to the fund’s investor base and strategy.  
• Appoint AMLCO/MLRO/DMLRO (service agreements, CVs, conflicts checks).  
• Select screening tools and establish sanctions/PEP workflows.  
• Define CDD standards (individuals vs. entities, SOW/SOF triggers, EDD criteria).  
• Implement ongoing monitoring with exception management and escalation to MLRO.  
• Schedule independent AML audit/testing annually (or risk-based cadence).  
• Deliver initial and annual training to operators and relevant staff.  
• Ensure your offering documents and subscription materials reflect AML representations, information rights, and disclosures aligned with current law.  

Digital-asset funds: a few extra watch-outs

For funds with crypto exposures, CIMA’s Guidance Notes include sector-specific guidance (e.g., VASPs), emphasizing source-of-funds/wealth verification, blockchain analytics where appropriate, and heightened monitoring of high-risk geographies and counterparties.  

How CV5 Capital helps managers meet AML expectations

Launching on the CV5 platform gives managers an institutional AML framework from day one:

• Appointment and oversight of independent AML Officers
• Administrator-led KYC/CDD, sanctions/PEP screening, and periodic reporting
• Integrated training calendar for directors and key staff
• Scheduled independent AML audits and remediation tracking
• Board-level dashboards aligned to CIMA’s governance expectations

Bottom line

Cayman’s AML regime is comprehensive and risk-based. Funds that operationalize the officer roles, CDD, monitoring, independent testing, and training will meet both regulatory and allocator expectations, and avoid costly remediation.

Ready to launch or upgrade your AML framework? Contact [email protected] and we’ll help you deploy a compliant, investor-ready Cayman fund.

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