A fund that reaches its independent AML audit cycle without documented internal audit reports from earlier cycles typically receives that gap as a finding in its own right, before the auditor even begins testing the underlying compliance programme. The practical fix is straightforward but time-sensitive: build an internal audit record from the fund’s very first cycle, well ahead of when the independent audit under Rule 12 is due.
Why the gap becomes the first finding
An independent auditor’s opening request is almost always for prior internal audit reports, because they establish whether the compliance programme has actually been tested over time. Where no such reports exist, or existing ones are thin or generic, the auditor has no baseline to work from, and typically records that absence as a deficiency before assessing anything else about the programme.
What follows a finding of this kind
A finding of this nature typically leads to a remediation plan agreed between the fund and its auditor, reported to the fund’s governing body, and reflected in the audit report filed with CIMA under Rule 12. Depending on severity and what else the audit uncovers, CIMA may follow up with its usual supervisory tools, from a request for a remediation timeline to a licence or registration condition in more serious cases.
Funds most exposed to this risk
This risk falls hardest on funds that historically relied entirely on a manager’s or administrator’s AML programme without maintaining separately documented reviews of their own, and on funds new to CIMA registration that have not yet established any review cadence. Both groups now need to start their own documented review history rather than assuming coverage from elsewhere.
Closing the gap before the audit is due
A fund without an existing review history should treat its first internal audit as the foundation for everything that follows: documenting the review properly, addressing what it finds, and repeating that discipline on the cycle it has set for itself. Two consecutive internal cycles, properly documented, put a fund in a materially stronger position when its independent audit arrives than starting that history only once the audit is imminent.
The cost of a missing review history is almost always avoidable, and almost always more visible in hindsight than it seemed at the time.
Related questions: What does an independent AML auditor ask for first, and how should a fund prepare for it? | How often must a Cayman Islands fund complete an independent AML audit under CIMA’s Compliance Programme Rule?
wb.group can advise funds seeking to establish and document an AML review history ahead of their independent audit. Contact us for more information.
FAQs
A fund that reaches its independent AML audit cycle without documented internal audit reports from earlier cycles typically receives that gap as a finding in its own right, before the auditor even begins testing the underlying compliance programme. The practical fix is straightforward but time-sensitive: build an internal audit record from the fund’s very first cycle, well ahead of when the independent audit under Rule 12 is due.
Not necessarily on its own, but it is typically recorded as a finding, and how CIMA responds depends on what else the broader audit uncovers and how the fund addresses the gap once it is identified.
A fund can document its current compliance programme and begin its review cadence going forward, but it cannot manufacture a review of a period that was never actually tested at the time. The more effective response is establishing the discipline from the current cycle onward.
Recovery depends on completing a genuine, well-documented internal review promptly and demonstrating a credible cycle going forward; a single properly conducted review after the finding, followed by consistent reviews thereafter, is generally viewed more favourably than no response at all.
The Rule does not set out a specific grace period tied to a fund’s age. A newly registered fund should establish its review cycle from early in its life rather than waiting until an audit is otherwise due.