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

Know Your Asset Due Diligence

One can ask – why would we need this?

The answer is simples -because you have to have overview of your portfolio not only from operational standpoint, but from the AML/CFT perspective.

Your portfolio is what you hold and receive dividends or interest on. This is also a channel of Investor money allocation. Therefore CSSF says it clearly that Investments have to be reviewed and AML/CFT risk on those – assigned.

Another can ask – well, my service provider is dong something. Is it sufficient?

The answer is – yes, unless you have followed AML Law 2004 including the common sense. Your service provider has to confirm that the AML/CFT risk si assigned per each asset and that they are doing sanctions screening on ongoing basis. You risk based approach can be flexible enough in respect of the assets/investments, but compliance of such risk based approach has to be in line with rule-based requirements which are:

Article 39 of CSSG Regulation 20-05 states what you need to know when we speak about sanctions compliance

 (1) Professionals shall have procedures and implement control mechanisms that allow them, when accepting customers or monitoring the business relationships, to identify, among others:

– the persons as referred to in Articles 30, 31 and 33 of this regulation;

– the funds coming from or going to “States,” persons, entities or groups as referred to in Article 33 of this regulation, or countries as referred to in Article 31 of this regulation;

– the complex or unusual transactions as referred to in Article 32 of this regulation;

 – “a transfer of funds with missing or incomplete information within the meaning of Regulation (EU) 2015/847 as referred to notably, in Article 15 of this regulation”.

 “(1a) For the purposes of Article 33 of this regulation, the professional also has the obligation to identify the States, persons, entities and groups subject to restrictive measures in financial matters with respect to the assets it manages and to ensure that the funds will not be made available to these States, persons, entities or groups.”

Meanwhile Article 34 oof same regulation states that “In the framework of investment business, the professionals shall carry out an analysis of the ML/TF risk posed by the investment and take due diligence measures adapted to the risk assessed and documented. Such analyses shall be formalised.

On top of this : The risk analysis on investments shall be reviewed annually and when particular events require it.”

To finalise and make it more clear, we need to point on the below important implementations which have to be part of your risk based approach in respect of the asset, no matter of the strategy chosen:

  1. Sanctions screening  for the asset and UBOs involved
  2. AML/CFT Risk assigned and analysis documented
  3. Annual or adhoc AML/CFT risk analysis is a must


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