This monthly update covers some of the key AML and KYC regulations that apply to fund managers and administrators globally.
As the global financial services industry continues to expand and become more internationalized – with investment funds increasingly looking to diversify their portfolios across sectors and national economies – the compliance challenge is becoming more complex and onerous. Despite international AML regulations and protocols such as those issued by the Financial Action Task Force (FATF), national AML regulations vary significantly across national jurisdictions.
In addition to the complexity of navigating these diverse regulations for fund managers with an international footprint, criminals are also exploiting the transnationalization of finance. In parallel, the many new technologies that are constantly being developed for investing and transacting are constantly being used to illegally capitalize on loopholes, bypass AML laws and make the most of regulatory voids.
KYC & AML for Fund Managers
In order to meet the multi-layered and constantly-evolving AML requirements of overlapping regulatory agencies, financial institutions (FIs) such as fund managers need to carry out diligent and effective KYC and Know Your Business (KYB) processes on their investors. This can help them prevent their services from t being used as a conduit for money laundering and other forms of financial crime.
An effective KYC/KYB program can generally be separated into three main components:
- Customer/investor identity verification (IDV) – establishing and verifying the identity of a customer (by validating their government issued IDs and carrying out selfie checks if they are an individual — or running corporate registry screening and checks if they are a business)
- Customer Due Diligence (CDD) – carrying out checks to ensure the customer has not been implicated in financial crimes in the past and is not on sanctions and other watchlists. This also includes ascertaining who a company’s UBOs are and assessing their risk profile.
- Ongoing monitoring – carrying out checks at consistent intervals after they have been onboarded in order to ensure that their transactional behaviour or status has not altered their risk profile.
Are you a fund manager looking for a KYC/KYB solution to meet all of your AML requirements? Get in touch and we’ll be happy to help you.
