AML/CFT Remediation

Key Considerations for Implementing and Maintaining Effective AML/CFT Remediation

This supervisory circular outlines how the Cayman Monetary Regulatory Authority International (“Cmrai” or the “Authority”) oversees AML/CFT remediation efforts by financial service providers (“FSPs”). It also identifies the key elements required for a successful remediation plan. FSPs are encouraged to utilize this publication to strengthen their compliance programs and ensure that their remediation plans are effective, adequate, and aligned with regulatory expectations.

Background

Onsite AML/CFT examinations are a core component of the Authority's regulatory and supervisory activities. These inspections allow the Authority to assess compliance with the AML/CFT regulatory framework and review corrective measures implemented to address deficiencies. If deficiencies are identified during inspections, the Authority issues an inspection report detailing the necessary actions to rectify the identified issues, referred to as “Requirements.” These must be addressed within a specified timeframe.

The Authority employs a variety of supervisory tools to ensure timely and effective remediation of the identified Requirements. The chosen action is determined by the risks posed, the severity of the deficiencies, and the conduct of the regulated entity. The Authority may:

1. Require detailed remediation action plans with set timelines and progress reports;
2. Request meetings with senior management to review remediation progress;
3. Mandate independent AML audits;
4. Issue Supervisory Letters outlining the Authority’s concerns and expectations for remediation;
5. Appoint a Special Advisor to oversee the process; and/or
6. Place the entity on enhanced monitoring and consider enforcement action if necessary.

From January 2019 to June 2023, the Authority conducted risk-based AML/CFT inspections for 603 FSPs, issuing 5,262 Requirements. As of June 2023, 93% of these Requirements were either completed or in the process of being addressed within the prescribed timelines.

The Authority also observed a 20% reduction in late Requirements from June 2022 to June 2023 and a 50% increase in voluntary meetings requested by FSPs to update the Authority on their progress.

Ongoing Monitoring of AML/CFT Requirements

Once Requirements have been issued, the Authority requires FSPs to report on their remediation progress monthly or quarterly, depending on the severity of the deficiency. Regular, clear communication helps the Authority track progress effectively.

The Authority provides a remediation template (the “Work Plan”) to facilitate communication. FSPs must update the Work Plan regularly, linking their responses and supporting documentation to the specific Requirements outlined in the inspection report. The Work Plan is essential for tracking the completion of each requirement.

FSPs are expected to provide detailed responses, along with supporting documents approved by senior management where required. The submitted information must be clearly linked to the specific Requirement being addressed.

Effective vs. Ineffective Approaches to AML/CFT Remediation Reporting:

More Effective	Less Effective
Clear point of contact at the FSP, with all communications directed to Cmrai’s AML/CFT Remediation Team.	No clear point of contact, with communications coming from multiple individuals or outsourced advisors.
Remediation actions are specific and directly linked to the identified Requirement.	Remediation actions are vague and not clearly linked to the specific Requirement.
Accountable persons are clearly identified for each action item.	It is unclear who is responsible for each action item.
Timeframes for each action are clearly linked to the timelines set by the Authority.	No clear or reasonable timeframes for completing the required remediation.
Supporting documentation is provided, highlighting any updates and clearly linked to the relevant Requirement.	Supporting documentation is missing or not clearly linked to the Requirement.
Regular updates on progress are provided in the Work Plan.	Responses are delayed or lacking, with poor communication on the Work Plan.
Senior management oversight is evident, with approvals clearly documented.	Documents submitted without evidence of senior management review or approval.
Clarifications are sought from the Authority when needed.	The Authority’s comments are not addressed or ignored.

FSPs may request an extension if they cannot meet the remediation deadline. Such requests are evaluated based on the specific circumstances and facts presented. If an extension is granted, the FSP may be required to provide an updated remediation action plan and submit more frequent progress updates.

The Authority will notify FSPs when no further comments are necessary, signaling the completion of the remediation process. A follow-up inspection may also be conducted to validate that the corrective actions have effectively addressed the identified deficiencies.