Chronological changes in the customer due diligence process Disclaimer: Schaffer Consulting does not provide legal advise. All views are the views of the authors. This presentation has been prepared for general guidance on matters of interest only. You should not act upon the information contained in this publication without obtaining specific advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this presentation © Schaffer Consulting

Change of AML/FT Responsibilities UCI UCI ManCo 100% responsible for due diligence on investors & distributors ManCo CSSF regulation 12-02 Transfer Agent 100% responsible for due diligence on investors & distributors “by Law” Transfer Agent x % responsible for due diligence on investors & distributors “as per delegation agreement” Points of discussion: Must the TA identify the UCI’s investor by Law or by delegation? How detailed must the delegation agreement be? UCI & ManCo must approve KYC/FT policy & control. What if different opinions, e.g. on the risk based approach? Delegation of suspicious transaction monitoring: Possible if TA can not report results and validations to UCI/ManCo? Consequences of new AML/FT responsibilities for UCI/ManCo: 1) Does the management of the Fund have policies, controls or procedures in place, enabling it to manage the money laundering and terrorist financing (hereafter “ML/TF”) risks to which the Fund is exposed including oversight monitoring controls over service providers? 
Could you please provide us with the policies? 
2) Has a person responsible for AML/CFT been designated at the level of the management of the Fund? 
3) Has the management of the Fund conducted an analysis of the risks of money laundering and terrorist financing to which the Fund is exposed, such as types of investors and distribution network? 
    Could you please provide us with your risk assessments 

4) Does the management of the Fund receive written reports on suspicious transactions identified and investors categorized as high risk, even if the AML/CTF duties have been delegated to a transfer agent? 
5) Does the management of the Fund have organizational means in place to proceed with suspicious transactions reports as required? 6) Has the management of the Fund transmitted suspicious transaction reports (STR) to the competent authorities during the period under review? 
7) Does the management of the Fund have staff training and awareness programs in place, even if the function is delegated? © Schaffer Consulting

Change of Due Diligence Process Mandatory use of client questionnaires No question-asking Simplified Due Diligence Evidence of regulation Authorised Signatory list Simplified Due Diligence Evidence of regulation Authorised Signatory list Due Diligence Client Questionnaire Business/profession Invest. Purpose Type of relationship Source of funds/wealth Sanction /PEP list screening Identification of client Identification of BO Identification of legal rep. Risk assessment Verification of identity and depth of due diligence based on level of risk Simplified: low level of verification Enhanced: deep level of verification Normal Due Diligence Client identification Verification of ID through certifications Normal Due Diligence Client identification Verification of ID through certifications Identification of B.O. Screening of PEP/Sanction lists New complexity: All transactions(irrespective of client risk profile) must be monitored and compared to risk profile ManCo needs to approve high risk accounts – cooperation between TA/ManCo Due diligence investor questionnaire: How much information should one request to establish the profile of an investor? Enhanced Due Diligence Applicable to Non-FATF and NCCT investors/distributors Non-face-to-face relationships Enhanced Due Diligence Applicable to investors/distributors from non-equivalent countries PEPs Complex investment structures Non-face-to-face relationships Non-Equivalent Correspondent relationships

Third Party Introducer Change of reliance on distributors Investor UCI Regulated FATF Intermediary Transfer Agent EXEMPTED from AML/FT obligations Omnibus Account Investor UCI Regulated & Supervised Equivalent Intermediary Transfer Agent EXEMPTED from AML/FT obligations Omnibus Account Correspondent relationship (between banks only) or similar relationships (Between non-banks or a bank and a non-bank) ManCo/UCI becomes responsible for demonstrating “quality” of respondent/distributor: Risk factors exceed country risk, regulation and supervision: background checks (previous sanctions, ongoing investigations, bad press), analysis of distribution model and client type, applicable AML/FT regulations and gaps, due diligence on financials, systems, people and corporate governance Increased cost for due diligence and ongoing transaction monitoring Distributor Due diligence requires judgment as opposed to tick-boxing Investor Third Party Introducer Regulated & Supervised Intermediary UCI Transfer Agent Risk Based Due Diligence © Schaffer Consulting Correspondent Account Respondent Regulated & Supervised Intermediary