1. 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
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2. 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?
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3. 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

4. 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
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Correspondent
Account
Respondent
Regulated & Supervised Intermediary