ICS Corporate Services - Navigating AML Requirements: Ensuring Compliance for BVI Managers

Navigating AML Requirements:

Ensuring Compliance for BVl Managers

Tiger Zhang, CPA Director, ICS Group

2024/05/21

CONTENTS

Part One Overview

Part Two Use Cases & Restriction

Part Three On-going compliance requirement

Part Four On-going AML Requirement

BVI Approved Manager

The BVI Approved Manager regime provides a simplified and efficient regulatory framework for investment managers. It is designed to streamline the approval process and reduce compliance burdens, making it an attractive option for both new and established managers

• Expedited Approvals: Typically within 7 days

• Reduced Compliance Obligations

• Substantial Management Capacity:

- Up to $1 billion USD for open-ended funds

- Up to $400 million USD for closed-ended funds

Ideal for medium to large-scale operations, this regime supports efficient fund management while ensuring compliance with regulatory standards

Investment Manager: Cayman Islands vs. BVI

Cayman Islands

Use Cases for BVI Approved Manager Regime

Ideal Scenarios

Medium to Large-Scale Operations:

Efficient management of significant fund sizes

Examples:

Managing a private equity fund with assets under $400 million USD

Start-Up Investment Managers:

Quick and simplified approval process

Providing investment advisory services to professional investors in a recognized jurisdiction

Existing Investment Managers

types

Launching a new hedge fund with expedited regulatory approval

Restrictions on Approved Manager

Business Scope

Can only undertake approved business activities

Asset Segregation

Open-ended and closed-ended funds must be managed separately to comply with statutory limits

Disqualification Notification

If disqualified under regulations, must stop taking new business and notify the FSC immediately

Rectification Period

Must resolve within three months by reducing assets, applying for a full investment manager license under SIBA, or obtaining FSC approval to continue as an Approved Manager

Excess Assets Notification

If assets exceed statutory limits, notify the FSC within 7 days

On-Going Obligations of Approved Manager

On-going obligations

Change Notification

Authorized Representatives

Inform the FSC within 14 days of any changes to initial application information or any significant impacts on business operations

Always have a BVI-authorized representative

Financial Statements

CRS Compliance

Prepare and submit unaudited financial statements, signed by a director, along with a director's certificate and an annual report within six months of the financial yearend.

Follow the BVI’s CRS requirements, including registration and annual filing of a nil return with the BVI International Tax Authority

AML/CFT Obligations

An Approved Manager must maintain AML/CFT policies and procedures and appoint a MLRO

Establish internal controls and conduct risk assessments per AML Code of Practice

and procedures, including

accurate customer information & conduct CDD

File suspicious activity and transaction reports

In addition, an Approved Manager is required to submit an annual AML/CFT return to the FSC by 31 March in each year.

Annual AML/CFT Return

Required to complete annually by 31 March each year

Key requirements include:

• Report the number of AML/CFT discussions in board and senior management meetings, and the date of the last risk assessment and its board approval.

• Confirm policies for record retention, specify the format and location of records, and ensure they are readily retrievable.

• Detail the number and risk ratings of products/services and provide information on customer types and PEP screening methods.

• Describe AML/CFT monitoring policies, third-party agreements, and the frequency and scope of AML/CFT audits.

• Provide the number of PEPs and third-party introducers from various jurisdictions and their geographic distribution.

• Report the number and value of SARs, the time taken for reporting and analysis, and document reasons for not filing SARs.

• Include any significant events or changes affecting AML/CFT compliance and any actions taken to address these issues.

• Certify that the provided information is accurate and complete, and that the entity is in compliance with AML/CFT regulations

Money Laundering Reporting Officer (MLRO)

Requirements:

• Must hold a diploma and have at least 3 years of work experience.

• Fit and proper.

• Must possess extensive knowledge of Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF), including relevant regional and international treaties (including UN resolutions).

• Must have sufficient understanding of the AML and CTF laws related to the Virgin Islands.

• Must possess the ability to make independent decisions, analytical decision-making skills, and not be easily influenced improperly.

Responsibilities

• Ensure the organization's operations comply with relevant AML/CTF laws and regulations.

• Develop internal reports and compliance operation manuals.

• Act as the contact person between the organization and regulatory authorities.

International Sanctions

Sanctions are an instrument of economic nature which seek to bring about a change in activities or policies such as violations of international law or human rights. Sanctions legislation in the British Virgin Islands (a “Sanctions Order”) mirrors the UK Sanctions Regulations, which put the EU Regulations and UN resolutions into effect.

The Sanctions Orders apply to:

• Any person in the British Virgin Islands

• A British citizen, a British overseas territories citizen, a British Overseas citizen, a British subject, a British National (Overseas) or a British protected person, ordinarily resident in the British Virgin Islands

• A body incorporated or constituted under the law of any part of the British Virgin Islands

To help British Virgin Islands financial service providers comply with sanctions, the BVI Financial Services Commission (FSC) has published the list of sanctions currently in force in the British Virgin Islands for reference. It is the responsibility of the financial service provider to keep itself informed and up to date with all applicable sanctions and changes thereto.

Currently sanctioned countries include:

FSC 24/25 Inspection Plan: Investment Business

FSC plans to inspect approximately 50 licenses of which 32% will be including investment business (15）

Onsite Inspection Components

• Reliance on Third Parties

- Assess risks from third-party operations within TCSPs

• Customer Due Diligence (CDD)

- Includes Enhanced Due Diligence (ECDD), Source of Funds/Wealth, and Nature of Business

• Verification of Legal Persons and Arrangements

- Ensure proper identification of beneficial owners and controllers

• Risk Assessments

- Evaluate customer and institutional risk frameworks and controls

• AML/CFT Compliance and Operations

- Assess areas such as Ongoing Monitoring, Suspicious Reporting, Sanctions Compliance, and Information Security

Inspection Components

Desk-based Reviews Components

• Nominee Shareholder Services

- Evaluate compliance in identifying beneficial owners and applying risk-based approaches

• Corporate Directorship Services

- Review business practices and risk mitigation in nominee directorship arrangements

• Sanctions Compliance

- Assess effectiveness in implementing financial sanctions and identifying sanctioned clients

ICS Group

China’s First Licensed Register Agent

• Founded in 2011, ICS Group is an independently operated corporate service provider, currently managed directly by the founding team.

Obtaining the BVI Tier 3 Trust License and the Cayman Islands Corporate Service Provider License

Establishing Office in Shenzhen and Forming ICS CPA Limited (Hong Kong)

Establishing Office in Shanghai Establishing Office in Beijing

Obtaining the Trust or Company Service Provider (TCSP) License in Hong Kong

Establishing Office in Hong Kong

Establishing Office in Haikou and Providing Fund Services

ICS Service Overview

ICS is committed to providing localized services, aiming to facilitate efficient communication and accurately accomplish entrusted tasks, assisting clients in handling domestic and overseas corporate entity affairs.

Formation Services

Company formation and maintenance services in BVI, Cayman Islands, Hong Kong, Singapore, Delaware (US), Mainland China, and other jurisdictions.

• Formation and maintenance services for domestic and foreign-invested enterprises in key cities within China

• Formation and maintenance services for entities in multiple jurisdictions such as British Virgin Islands, Cayman Islands, Singapore, Seychelles, Samoa, Delaware, and more

Fund Services

Compliance operation maintenance services required for the continuous operation of regulated funds.

• Fund Compliance: Anti-Money Laundering Compliance Officer, Investor KYC, FATCA/CRS tax filing

• Fund Operation: Quarterly Reports, Capital Account Statements, Performance Allocation Calculations, K-1 tax filing

• RMB Fund bookkeeping services

Cross-Border Services

Guidance and consulting solutions for optimal operations in cross-border investment and financing matters concerning foreign exchange compliance and overseas direct investment (ODI).

• Services for forex policies related to cross-border investment, including personal overseas investment and equity incentive plans registration

• Compliance consultation and declaration services for the overseas direct investment (ODI) of corporates

Financial and Tax Services

One-stop overseas auditing and tax filing services for businesses (bookkeeping and financial statement preparation, and tax filing).

• Compliance Reporting

• Statutory Audits

• Responses to tax matters

• Audit and Tax Filing

• Hong Kong company tax filing services

 Filling, calculating, and submitting Profits Tax returns

 Applying for a deferment of provisional tax

 Completing employer's tax return (BIR56A form)

Business Services - Experience

With over a decade of experience, ICS is well placed to help our clients close complex deal closings.

Fully Licenses in

three(3) jurisdictions

• More than 10 years’ experience

• BVI/Cayman registration agent license

• BVI Authorized Representative license

• Hong Kong Trust and Corporate Service Provider (TCSP) license

Professional Service Team

• A service team of more than a hundred people

• Each member brings over aa decade of experience to their role and some holds professional licenses

• Offices in Beijing, Shanghai, Hong Kong, Haikou, the Cayman Islands and the BVI

Customer Value Proposition

• Offer constructive solutions

• Professional, process-based, transparent and systematic

Extensive Project Experience

• Assisted in over 1,000 No.37 registration projects with more than 10,000 filing individuals

• Assisted in more than 100 ODI registrations

• Assisted in launching more than 100 USD funds

Ability to handle complex closings

• Completed over 1,800 projects annually

• Annual closing amounts exceed $20 billion

• Average closing project involves dozens of shareholders and directors

Powerful IT system

• Significant investment in in-house system, creating convenient, fast, professional CRM

• Adopted industry-standard AML system, LexisNexis customized version