Key Changes to the Cayman Islands’ DAML regime

As of 2 January 2025, significant changes have been made to the Proceeds of Crime Act (POCA) regarding the Defence Against Money Laundering (DAML) regime. Previously, it was sufficient to file a Suspicious Activity Report (SAR) with the FRA, however under the new framework, obtaining a DAML now requires explicit consent from the Cayman Islands Financial Reporting Authority (FRA) before proceeding with a transaction.

If you filed a SAR before 2 January 2025 and the transaction is still ongoing, you may need to resubmit it as a DAML SAR to comply with the new requirements.

What's changed?

• A DAML SAR must be filed with the FRA.
• The FRA has 7 working days to grant or refuse a DAML.
• If the FRA does not respond within that timeframe, consent is deemed granted, and the transaction may proceed.
• If the FRA explicitly refuses consent, authorities may investigate further, triggering a 30-calendar-day moratorium period.
• The Moratorium Period starts the day after the FRA issues the refusal notice.
• Law enforcement may apply to the court for an extension of the moratorium period, where deemed necessary.

Key points to consider:

• A DAML SAR is only required when there is a money laundering offence under POCA.
• The DAML SAR must clearly state that it is a DAML request and must reference one of POCA’s core money laundering offences:
• S133 (Concealing criminal property)
• S134 (Arrangements involving criminal property)
• S135 (Acquisition, use, or possession of criminal property)
• Retrospective DAML’s will not be provided.
• The process for filing a regular SAR remains unchanged.
• Tipping off is a criminal offence—handle communications with extreme caution.
• Regulations and further guidance on the DAML regime are forthcoming—stay tuned for more updates.

Next steps for your business

Businesses should:

• Enhance internal systems to detect and manage money laundering risks.
• Review and update contracts, terms and conditions, policies, and procedures.
• Train staff on the new requirements and provide a "cheat sheet" of responses to avoid tipping off.
• Manage client expectations around transaction delays.
• Assess risk appetite for proceeding with transactions even if DAML consent is granted.
• Consider potential litigation risk
• Ensure relevant service providers know their obligations and duties surrounding this change and liaise with the relevant AMLCO/MLRO

Our AML team is here to help. If you need guidance on navigating these changes, please reach out to us.