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44 Cayman. Moving finance forward.<br />
NATIONAL<br />
RISK<br />
UNDER THE<br />
MICROSCOPE<br />
ASSESSMENT<br />
By Sandra Edun-Watler<br />
The Cayman Islands is currently<br />
undergoing its first National<br />
Money Laundering/Terrorist<br />
Financing (“ML/TF”) Risk<br />
Assessment. The objective of a risk<br />
assessment is to identify the threats<br />
or potential threats to the Anti-<br />
Money Laundering (AML) regime<br />
that the jurisdiction has in place.<br />
History<br />
The requirement to perform<br />
a National Risk Assessment<br />
stems from the Financial<br />
Action Task Force’s (FATF) 40<br />
Recommendations on International<br />
Standards on Combating Money<br />
Laundering and the Financing of<br />
Terrorism and Proliferation issued<br />
in 2012. The FATF is an intergovernmental<br />
body established<br />
in 1989, and its mandate is to set<br />
standards and to promote effective<br />
implementation of legal, regulatory<br />
and operational measures for<br />
combatting money laundering,<br />
terrorist financing and the financing<br />
of proliferation, as well as other<br />
related threats to the integrity of the<br />
international financial system. This<br />
is achieved by member countries,<br />
of which there are 34, adopting<br />
these standards and adhering to<br />
the recommendations that have<br />
been issued. Although the Cayman<br />
Islands are not a member of the<br />
FATF, they are a member of its<br />
regional standard setter associate<br />
member, the Caribbean Financial<br />
Action Task Force (“<strong>CF</strong>ATF”),<br />
which was established in 1996.<br />
The <strong>CF</strong>ATF is an organisation<br />
of 27 states and territories in the<br />
Caribbean basin which have agreed<br />
to implement common countermeasures<br />
against ML/TF through<br />
endorsing the 40 recommendations<br />
produced by the FATF.<br />
The National Risk Assessment<br />
comes about as a result of<br />
the revisions to the FATF<br />
Recommendations in 2012. The<br />
first recommendation in this list<br />
is that countries should identify,<br />
assess and understand the money<br />
laundering and terrorist financing<br />
risks that exist in their countries and<br />
should take action to coordinate<br />
efforts to assess these risks. As<br />
this is a completely new global<br />
process, introducing a brand new<br />
methodology for assessments, it<br />
is being undertaken for the first<br />
time at a national level by many<br />
countries that adhere to these<br />
international standards. Norway<br />
and Spain have been the first two<br />
countries to be assessed with the<br />
new methodology last October by<br />
the FATF. Assessments are done<br />
via mutual evaluations that are<br />
conducted with the country and<br />
representatives of the FATF or<br />
regional standard setter.<br />
Why is it Being Done?<br />
Any jurisdiction that expects to be<br />
at the forefront of international<br />
financial services should ensure<br />
that risks are identified, assessed<br />
and action taken to mitigate issues<br />
regarding money laundering and<br />
terrorist financing. The National<br />
Risk Assessment is to ensure<br />
that the Cayman Islands have<br />
appropriate ML/TF policies and<br />
procedures in place, that these<br />
policies and procedures are being<br />
followed and that all the identified<br />
‘risk’ areas can be addressed. The<br />
successful passing of this assessment<br />
will ensure Cayman retains its high<br />
international reputation. This means<br />
that there must be policies, controls<br />
and procedures in place, not only<br />
at a national level but also within<br />
the various industries and sectors<br />
that enable the management and<br />
effective mitigation of risks that<br />
have been identified. Additionally,<br />
systems need to be installed to<br />
monitor the implementation of<br />
those controls and to enhance<br />
them, if necessary. It is useful<br />
if the process is as inclusive and<br />
co-operative as possible.<br />
The objective and the whole basis<br />
of a National Risk Assessment is<br />
to ensure that measures in place<br />
to prevent or mitigate money<br />
laundering and terrorist financing<br />
are proportionate with the risks