Anyone registering a new Cayman Islands private fund should check one detail before submitting through REEFS: AML officer independence. Since CIMA’s new AML Compliance Rule took effect on 18 September 2026, we have seen the Authority return registration applications where a director, a principal of the general partner or a principal of the investment manager has also been named as the fund’s AMLCO, MLRO or Deputy MLRO. The fix is straightforward, but few in the market appear to be aware of the issue yet.
What CIMA is saying about AML officer independence
The Rule requires the AML compliance officer to carry out the compliance function independently and objectively from the business and operational functions they oversee.
It does not expressly prohibit a director from also acting as an AML officer. And, where full separation is not practicable, the Rule contemplates conflicts of interest being managed.
In practice, however, CIMA is taking a firmer line. It has recently been returning registration applications. And in doing so, the Authority has stated that holding a governance role alongside AML officer duties has the potential to compromise fully independent judgment, and that it requires AML officers to be independent natural persons.
That is a meaningful shift. CIMA’s earlier guidance tended to describe independence in terms of decision-making autonomy, seniority and direct access to the governing body, which left room for a suitably qualified director to hold the role with safeguards in place. For funds coming through the registration process, that option has now narrowed considerably.
CIMA’s published FAQs continue to describe AMLCO independence in functional and reporting terms and acknowledge that additional operational duties may be permissible where independence is preserved. Nevertheless, in certain registration applications we have handled, CIMA has challenged proposed appointments involving overlapping governance or management responsibilities. Sponsors should therefore consider both the published requirements and the independence concerns being raised during the registration process.
A familiar direction of travel
This should not come as a complete surprise. CIMA has applied the same expectation to licensed entities for some time, and we have seen it hold that position even when the argument was made that a separate AML officer was disproportionate to the nature, size and complexity of the business. The Authority speaks the language of a risk-based approach, but on this point it appears that it is applying a consistent standard regardless of fund size.
For a small fund with a handful of investors and a single underlying asset, that can feel like using a sledgehammer to crack a nut. A sponsor can respond to CIMA with a case for retaining the director, setting out a conflicts policy, recusal arrangements and direct reporting lines. Given the categorical wording CIMA is using, though, that route is likely to mean further correspondence and a delayed launch, and no guarantee of success.
How to get it right first time
A practical way to reduce registration queries is to appoint AML officers who are clearly independent of the fund’s governance and management. In practice, that means:
- Appoint an AMLCO, MLRO and DMLRO who are not directors, GP principals, investment manager principals or other Operators of the fund.
- Remember that the AMLCO and MLRO or DMLRO can be the same person, but the MLRO and DMLRO must be different individuals.
- Confirm that each appointee is a natural person at managerial level with the qualifications, experience and capacity for the role, and reports directly to the governing body.
- Finalise appointments and reporting lines before submission, so the REEFS filing reflects the structure that CIMA will review.
Outsourcing the roles to a specialist provider is a common and practical solution, particularly for sponsors with a small team. The governing body retains ultimate responsibility for the fund’s compliance programme, so the appointment should be supported by a clear service agreement and regular reporting. The Rule also requires CIMA to be notified of any outsourcing agreement relating to material functions of the compliance programme.
What about existing funds?
CIMA’s current focus is on new registrations, and it has not said whether it will revisit existing funds where directors also serve as AML officers. Given the Authority’s direction, we would encourage boards of existing funds to review their arrangements now, so the question is settled on their own timetable and not raised for the first time during an inspection or a change filing.
How wb.group can help
At wb.group, we provide independent AMLCO, MLRO and DMLRO services to Cayman funds and their managers. If CIMA has returned your application, or you would like your AML officer structure checked before you file, please get in touch with our team.
FAQs
The Rule on an Effective Compliance Programme for the Prevention and Detection of Money Laundering, Terrorist Financing and Proliferation Financing – generally referred to as the AML/CFT/CPF Compliance Rule – was issued by the Cayman Islands Monetary Authority (CIMA) and took effect on 18 September 2026. It sets out, with the force of law, what every financial services provider (FSP) regulated and supervised by CIMA must have in place to prevent and detect money laundering, terrorist financing and proliferation financing.
The Guidance Notes still exist and continue to provide interpretive detail, but the Compliance Programme Rule now sets the binding legal standard. Where the two overlap, compliance with the Rule is what CIMA will test against.
No. The Anti-Money Laundering Regulations set out the underlying customer due diligence, officer-appointment and recordkeeping obligations. The Compliance Programme Rule sits alongside them and adds the binding programme-effectiveness and independent audit standard, issued under section 34(1) of the Monetary Authority Act.
It applies to every FSP regulated and supervised by CIMA under the Regulatory Acts, including branches, subsidiaries, affiliates and other members of a CIMA-regulated financial group. The specific scope for funds is covered in a related question in this series.
Yes. Because the Rule carries the force of law, CIMA can point directly to a breach of it, and can use its usual supervisory tools, including directions, licence or registration conditions, or referral for further investigation, where a deficiency is material.