AML/CFT

On 18 January 2024, the European Commission published its Commission Delegated Regulation (EU) 2024/163 of 12 December 2023 amending Delegated Regulation (EU) 2016/1675 as regards the deletion of the Cayman Islands and Jordan from the table in point I of the Annex listing high-risk third countries, meaning the countries with strategic deficiencies in their AML/CFT regimes that pose significant threats to the EU financial system (“Regulation”).

In efforts to safeguard the EU financial system against money laundering and terrorist financing risks, the EU Commission has put in place a list of high-risk third countries, commonly known as the EU Blacklist. This list carries significant implications for financial transactions between EU Member States and the listed high-risk third countries. Financial market participants within the EU are required to apply enhanced AML/CFT due diligence measures when dealing with transactions involving these high-risk third countries.

A year after being listed as a high-risk third country, the Cayman Islands have been de-listed due to their significant progress in strengthening their AML/CFT frameworks. Please note that on 25 October 2023 the Cayman Islands were also de-listed from the Financial Action Task Force (“FATF”) list of “Jurisdictions under Increased Monitoring”, also known as the “Grey List”, following their removal in October 2020 from the EU list of non-cooperative jurisdictions for tax purposes.

This is of particular relevance with respect to the revised AIFMD (“AIFMD II”) and its amended third-country marketing rules, which henceforth prohibit non-EU AIFMs from marketing non-EU AIFs to EU investors if such non-EU AIFMs or non-EU AIFs are established in a third country identified and listed as a high-risk third country in the AIFMD annex while previously being limited to not being listed as a non-cooperative country and territory by FATF. Hence, the removal of the Cayman Islands from these lists prior to the entry into force of the AIFMD II (i.e., 15 April 2024) is a helping hand for EU AIFMs willing to manage Cayman Islands-based AIFs.

On 31 January 2024, the CSSF issued a communication in the continuity of application of CSSF Circular 19/721 on dematerialisation of requests to the CSSF regarding procedures between CSSF UCI Departments and Luxembourg investment fund managers (IFMs). The CSSF now directs outbound emails from the CSSF UCI Departments solely to designated eDesk users categorised as “Board Members” or “Conducting Officers” on the CSSF eDesk Portal. In connection with AML/CFT related exchanges, communication may include the “AML/CFT responsible officer” (whose role is reserved to the RR and RC and their backups) alongside the aforementioned eDesk users. For other exchanges, the CSSF’s process remains unchanged, contacting responsible individuals directly. In this regard, IFMs are reminded to keep eDesk users’ email addresses up to date.