Sectoral guidelines for providers of investment funds

Sectoral guidelines for providers of investment funds

EBA has published the final Guidelines under Articles 17 and 18(4) of Directive (EU) 2015/849 on simplified and enhanced customer due diligence. The Risk Factors guidelines give an overview on the factors credit and financial institutions should consider when assessing the money laundering and terrorist financing risk associated with individual business relationships and occasional transactions.

Sectoral guidelines for providers of investment funds

205.

The provision of investment funds can involve multiple parties: the fund manager, appointed advisers, the depositary and sub-custodians, registrars and, in some cases, prime brokers. Similarly, the distribution of these funds can involve parties such as tied agents, advisory and discretionary wealth managers, platform service providers and independent financial advisers.

206.

The type and number of parties involved in the funds distribution process depends on the nature of the fund and may affect how much the fund knows about its customer and investors. The fund or, where the fund is not itself an obliged entity, the fund manager will retain responsibility for compliance with AML/CFT obligations, although aspects of the fund’s CDD obligations may be carried out by one or more of these other parties subject to certain conditions.

207.

Investment funds may be used by persons or entities for ML/TF purposes:

• Retail funds are often distributed on a non-face-to-face basis; access to such funds is often easy and relatively quick to achieve, and holdings in such funds can be transferred between different parties.
• Alternative investment funds, such as hedge funds, real estate and private equity funds, tend to have a smaller number of investors, which can be private individuals as well as institutional investors (pension funds, funds of funds). Funds that are designed for a limited number of high-net-worth individuals, or for family offices, can have an inherently higher risk of abuse for ML/TF purposes than retail funds, since investors are more likely to be in a position to exercise control over the fund assets. If investors exercise control over the assets, such funds are personal asset-holding vehicles, which are mentioned as a factor indicating potentially higher risk in Annex III to Directive (EU) 2015/849.
• Notwithstanding the often medium- to long-term nature of the investment, which can contribute to limiting the attractiveness of these products for money laundering purposes, they may still appeal to money launderers on the basis of their ability to generate growth and income.

This chapter is directed at:

a) investment fund managers performing activities under Article 3(2)(a) of Directive (EU) 2015/849; and

b) investment funds marketing their own shares or units, under Article 3(2)(d) of Directive (EU) 2015/849.

Other parties involved in the provision or distribution of the fund, for example intermediaries, may have to comply with their own CDD obligations and should refer to relevant chapters in these guidelines as appropriate.

For funds and fund managers, the sectoral guidelines in Title III, Chapters 1, 7 and 8, may also be relevant.

Sectoral guidelines for providers of investment funds – Risk factors

Product, service or transaction risk factors

210.

The following factors may contribute to increasing the risk associated with the fund:

• The fund is designed for a limited number of individuals or family offices, for example a private fund or single investor fund.
• It is possible to subscribe to the fund and then quickly redeem the investment without the investor incurring significant administrative costs.
• Units of or shares in the fund can be traded without the fund or fund manager being notified at the time of the trade and, as a result, information about the investor is divided among several subjects (as is the case with closed-ended funds traded on secondary markets).

211.

The following factors may contribute to increasing the risk associated with the subscription:

The subscription involves accounts or third parties in multiple jurisdictions, in particular where these jurisdictions are associated with a high ML/TF risk as defined in paragraphs 22-27 of Title II of the guidelines.

• The subscription involves third party subscribers or payees, in particular where this is unexpected.

212. The following factors may contribute to reducing the risk associated with the fund:

• Third party payments are not allowed.
• The fund is open to small-scale investors only, with investments capped.

Sectoral guidelines for providers of investment funds – Customer risk factors

213. The following factors may contribute to increasing risk:

• The customer’s behaviour is unusual, for example:

i. The rationale for the investment lacks an obvious strategy or economic purpose or the customer makes investments that are inconsistent with the customer’s overall financial situation, where this is known to the fund or fund manager.

ii. The customer asks to repurchase or redeem an investment within a short period after the initial investment or before the payout date without a clear rationale, in particular where this results in financial loss or payment of high transaction fees.

iii. The customer requests the repeated purchase and sale of shares within a short period of time without an obvious strategy or economic rationale.

The customer transfers funds in excess of those required for the investment and asks for surplus amounts to be reimbursed.

The customer uses multiple accounts without previous notification, especially when these accounts are held in multiple jurisdictions or jurisdictions associated with higher ML/TF risk.

The customer wishes to structure the relationship in such a way that multiple parties, for example non-regulated nominee companies, are used in different jurisdictions, particularly where these jurisdictions are associated with higher ML/TF risk.

vii. The customer suddenly changes the settlement location without rationale, for example by changing the customer’s country of residence.

viii. The customer and the beneficial owner are located in different jurisdictions and at least one of these jurisdictions is associated with higher ML/TF risk as defined in the general part of the guidelines.

The beneficial owner’s funds have been generated in a jurisdiction associated with higher ML/TF risk, in particular where the jurisdiction is associated with higher levels of predicate offences to ML/TF.

214.

The following factors may contribute to reducing risk:

• the customer is an institutional investor whose status has been verified by an EEA government agency, for example a government-approved pensions scheme;
• the customer is a firm in an EEA country or a third country that has AML/CFT requirements that are not less robust than those required by Directive (EU) 2015/849.

Sectoral guidelines for providers of investment funds – Distribution channel risk factors

215.

The following factors may contribute to increasing risk:

• unclear or complex distribution channels that limit the fund’s oversight of its business relationships and restrict its ability to monitor transactions, for example the fund uses a large number of sub-distributors for distribution in third countries;

• the distributor is located in a jurisdiction associated with higher ML/TF risk as defined in the general part of these guidelines.  

216.

The following factors may indicate lower risk:

The fund admits only a designated type of low-risk investor, such as regulated firms investing as a principal (e.g. life companies) or corporate pension schemes.

• The fund can be purchased and redeemed only through a firm, for example a financial intermediary, in an EEA country or a third country that has AML/CFT requirements that are not less robust than those required by Directive (EU) 2015/849.

Sectoral guidelines for providers of investment funds – Country or geographical risk factors

217. The following factors may contribute to increasing risk:

• Investors’ monies have been generated in jurisdictions associated with higher ML/TF risk, in particular those associated with higher levels of predicate offences to money laundering.
• The fund or fund manager invests in sectors with higher corruption risk (e.g. the extractive industries or the arms trade) in jurisdictions identified by credible sources as having significant levels of corruption or other predicate offences to ML/TF, in particular where the fund is a single investor fund or has a limited number of investors.

Compliance & Geldwäschebeauftragter – Sectoral guidelines for providers of investment funds

Unsere Praxisseminare Geldwäsche und Fraud – Basisseminar, Geldwäsche und Fraud – Aufbauseminar, Geldwäsche & Fraud – Update und Geldwäsche & Fraud – Forum verschaffen Ihnen einen umfassenden Überblick zu den aktuellen gesetzlichen Neuerungen und unterstützen Sie dabei, Geldwäsche- und Betrugsstrukturen zu erkennen, zu bewerten und rechtzeitig zu verhindern. In den Compliance-Seminaren wie Compliance, Compliance für Vertriebsbeauftragte, Neue Compliance-Funktion gemäß MaRisk oder auch Compliance im Fokus der Bankenaufsicht werden Ihnen die Ausgestaltung der Schnittstellen zwischen Compliance, Datenschutz, IT, Zentrale Stelle und Interner Revision näher gebracht. Auch die Mindestanforderungen zum Aufbau eines Gesamt-IKS werden hier beispielsweise näher erläutert.

Zudem haben Sie die Chance, nach Teilnahme der Seminare die Zertifizierungslehrgänge zum Compliance Officer, zum AML & Fraud Officer oder zum Geldwäsche-Beauftragter zu absolvieren.