On 18 August 2017 we informed you that on 10 August 2017, the Dutch Authority for the financial markets (Autoriteit Financiële Markten, AFM) sent a general email to small registered AIFMD managers with respect to the questionnaire filled out by such managers regarding compliance with the Sanctions Act 1977 (Sanctiewet 1977, Sanctions Act) and the Dutch Anti-Money Laundering and Counter-Terrorist Financing Act (Wet ter voorkoming van witwassen en financieren van terrorisme, the Dutch AML Act).
This is to inform you that in a subsequent newsletter published on the website of the AFM on 3 October 2017, the AFM made another announcement with respect to the questionnaire completed by small registered managers. Please find below the highlights of the newsletter:
- The AFM indicates that on the basis of the answers and responses received by it, it has become clear that part of the group of registered small managers needs to adhere better to the Sanctions Act and the Dutch AML Act. The registered small managers have received individual feedback indicating the areas in which the managers should make improvements.
- The AFM is currently conducting on-site investigations with a number of registered small managers. Among other things, the AFM investigates whether the feedback and recommendations given by the AFM have led to improvements with the registered small managers.
- An important concern of the AFM is that a substantial number of small registered managers do not have a written Dutch AML and Sanctions Act policy. Such a policy should contain internal procedures such as the determination when a client falls within a certain risk category and to give insight into the risks of the managers involvement in money laundering and terrorist financing and how this risk may be controlled or managed.
- Although most registered managers perform client due diligence within the meaning of the Dutch AML Act, nearly half of the registered small managers does not perform research in respect of other business relationships, for example into the seller of real estate in which is invested by the fund or the persons behind a start-up in which is invested by the fund.
- A third of the managers suffices with requesting a copy of a valid ID (or passport) when performing client due diligence, while pursuant to the legislation the identity of the client must be determined on the basis of documents, data or information from a reliable and independent source. Requesting a copy of a valid ID is only allowed if the identity of the client and the ultimate beneficial owner has already been verified by another Wwft institution, such as a bank.1
- A number of registered small managers invests in countries with a (high) risk or has clients which (for example via the UBO) have a connection with a (high) risk country. In the group of risk countries, the AFM in any event includes countries (i) that have been determined as such by the Financial Action Task Force, (ii) that appear in the top 50 of the Corruption Perceptions Index 2015 or (iii) countries on which international sanctions have been imposed. In the event that a registered small manager does business involving (high) risk countries, the AFM expects the manager to reduce the risk of anti-money laundering, for example by means of appropriate (additional) procedures.
- The obligation to screen against sanction lists generally seems to be adhered to, nearly 90% of all registered small managers screens clients against such lists.