The age of compliance

Read our article in the Cayman Financial Review Magazine, eversion 

About CICA  

Who would have thought a decade ago that we would need to create a separate industry solely to keep ourselves in line with ever-increasing financial services standards and rules. With greater access to global markets, the move from localised, and relative, self-regulation to international conformity was swift and relentless.

From anti-money laundering and combating of terrorist financing to prudential regulation and cross-border cooperation, the last decade will be known hereafter as the advent of the age of compliance.

For the Cayman Islands, like many other onshore and offshore jurisdictions, the epiphany came with the introduction of the Money Laundering Regulations in 2000.

Although financial service providers had understood and applied the fundamental proceeds of crime legislation and industry codes, the regulations mandated the creation of policies and procedures, and more importantly specific “roles” for employees. In the matter of months, risk managers became money laundering reporting and compliance officers.

Like any laws, especially those created from international principles and monitored by international agencies, the fear of sanction was obvious. Compliance officers and MLROs had both their employers and their own responsibilities to consider. They inevitably needed a collaborative resource to help them fulfil their function.

In the Cayman Islands, an informal group of compliance officers, risk managers and advisors started to meet regularly to question practices and share ideas. The group initially included bankers, lawyers, accountants, fund administrators and trust officers. It was evident that an umbrella organisation needed to be formed that would be representative of all persons subject to the regulations. So, the Cayman Islands Compliance Association (CICA), a voluntary, non-profit organisation, was formed in late 2000.

From a humble membership of less than 20 institutions in 2000, CICA now represents a solid membership of over 130 institutions. CICA is run by an Executive Committee of 13 elected members from a cross section of the financial service industries. To maximise effectiveness, three further sub-committees were created to focus on legislative and policy developments, training and awareness and promotional events.

Over the years, CICA has been an influential participant in a number of important initiatives. For its members and the wider community, CICA organises, annually, a one-day seminar and multiple breakfast seminars on a range of pertinent topics.

The subjects discussed at such seminars reflect how much the compliance role has transformed over the last decade. What was once a singular focus on AML, now includes information exchange, international sanctions, anti-corruption and bribery, regulatory reporting, corporate governance, internal audit and risk controls and the extra-territorial reach of foreign legislation.

CICA is also a member of a number of working groups and wider industry committees. Understandably, CICA is one of the key members of the AML Guidance Notes Committee. It assists CIMA in relation to prudential policy developments, such as licensee reporting and responses to international initiatives. CICA has been particularly helpful in meeting with and responding to enquiries arising from the assessments conducted by the IMF and Financial Action Task Force.

CICA also provides feedback and assistance to other committees such as the Financial Services Legislative Committee, in relation to legislative developments of importance to its members. It also assists other industry associations with feedback on distinct issues and training sessions, eg the Banker’s Association AML training, CISPA (public accountants) and CIFAA (fund administrators).

Perhaps the best acknowledgement of CICA’s importance and influence in Cayman financial services is that the Cayman Islands Monetary Authority, the financial services regulator, specifically asks whether licensees are members of CICA when conducting their onsite inspections.

Thankfully, the Cayman Islands are not the only Caribbean jurisdiction to have a successful, voluntary compliance association model. The Bahamian Association of Compliance Officers, the Association of Bermuda Compliance Officers, the Barbados Association of Compliance Professionals and the British Virgin Islands Association of Compliance Officers each have a strong presence in their jurisdictions. Most recently, the autonomous Association of Compliance Officers of Trinidad and Tobago was born from a sub-committee of the Bankers Association.

Recognising that the compliance movement in the Caribbean was growing as rapidly as the laws and regulations themselves, some of the Head’s of Associations began discussions to form an alliance to provide assistance across the region.

At a conference hosted by BACO in the Bahamas in 2004, it was agreed that an annual event should be arranged in the Caribbean under the auspices of what was loosely termed as the Caribbean Regional Compliance Association.

Since 2004, the associations have worked together to bring a conference event to different regional jurisdictions. Over time, the key objectives of the regional movement began to crystallise and at a conference held in Port of Spain, Trinidad in 2008, each of the above-mentioned associations, together with associations from, what was then, the Netherlands Antilles and Anguilla, signed a Memorandum of Understanding to give form and effect to the regional body.

The key objectives of the CRCA are largely similar to those of CICA and the other jurisdictional associations and focus on promoting high levels of skill, knowledge, professional competence and integrity on the part of compliance officers, promoting internationally accepted standards and principles, identifying issues and providing a platform for discussion, training and support to members and jurisdictions with emergent associations.

In March 2012, the CRCA annual conference returns to Port of Spain to revive the cause and support the newly formed association. With the extent of legislative and regulatory advancements since the financial crisis, particularly those emanating from the US and Europe, such an initiative is more important than ever before.

Over the last six to eight years, most Caribbean jurisdictions have been subject to mutual evaluation by the Caribbean FATF (an Associate Member of the FATF) and a review by the IMF.

Peripherally, the same jurisdictions have been examined and assessed (for different purposes) by other international organisations such as the OECD and the Financial Stability Board (formerly the Financial Stability Forum).

In some heartening, recent news for the region, the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes released its report on the progress made by each of the jurisdictions that underwent a peer review of exchange of information and cooperation standards.

In the majority of cases most recommendations had been addressed and each of the main jurisdictions were recorded as great improvements.

Separately, the FSB released its report on international cooperation and information exchange and certain local jurisdictions including the Cayman Islands, BVI, Bermuda were listed as having strong adherence to internationally accepted standards and codes.

As a global market participant, this level of monitoring is, and will be, constant for each jurisdiction. We have proved so far that we can adapt to the new age of compliance. Given the current global economic outlook, however, it is hard not to wonder whether the next phase of regulation will truly test our resolve.

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