Fund, risk assessment, AIFM, AML, KYC, Compliance

AML/CFT KPIs – to be or not to be

How do you access performance of Internal and Outsourced Portfolio managers and where is a red line which you don’t want to cross in order not to loose business flow and not bring more fatigue to the AML process itself. Lets see

Question is complex, but manageable. For Internal PM function you would have CMP, assessment and sampling as couple of tools to assess proper conduct of professional duties. Your PM/KYC team would be working with you and lets be fair – it easier to monitor internally managed portfolio and define the risks associated with it. Each quarter your Transfer Agent would send you AML/CFT KPI reports which will always end up with amendments, but at least this is also an easy exercise.

What about the Delegated PM? As per CSSF Circular 18/698, each IFM in their assessment of the risks arising from delegation, have to ensure specific criteria while initial assessment and signing of PMOA itself. Such criteria includes among others the ability of the delegate to provide sufficient and relevant reports and key performance indicators for the ongoing monitoring by the IFM. If everyone understands that without operational KPIs we cant move forward in our exante and expost analysis, the AML/CFT KPIs are still something what outsourced PM would initially google to understand the background.

This is why it is crucial for any outsourcing activity to have a proper oversight in a form of ongoing monitoring and specifically in our keys – AML/CFT KPIs.

AS CSSF Circular says: Thus, the conducting officers must regularly receive detailed reports on the results of the control arrangements, including in particular key performance indicators, for all the UCIs managed by the IFM. The frequency of submission and the detail of such reports will be determined by the profile of the managed UCIs and their inherent risks. The IFM must determine and implement its own key performance indicators when the key performance indicators provided by the delegate are not sufficient to ensure an appropriate ongoing monitoring

Why we need KPIs? Because we have to understand and make risk assessment of our business. If you dont know AM/CFT risks associated with the portfolio managed by your delegate, how can you assess overall business wide risk for your FUND and more over- report this risk to your regulator.

Think, act and improve

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