On 27 October 2021, the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten, the AFM) published a report on how managers of alternative investment funds (AIFMs) comply with the Act on the prevention of money laundering and terrorist financing (Wet ter voorkoming van witwassen en financieren van terrorisme, Wwft) and the Sanctions Act 1977 (Sanctiewet 1977) (the Report). The Report is based on responses from AIFMs to the annual compliance questionnaire which was sent by the AFM in September 2020. 583 AIFMs responded to the questionnaire.
The most important insights gained with regard to combatting money laundering and terrorist financing are:
- a relatively large part of the assets under management are invested in sectors and countries with an increased risk of money laundering and terrorist financing (approximately 15% of a total of € 954 billion). The following categories of assets were considered to carry an increased risk for purpose of the AFM’s compliance questionnaire:
- virtual currencies;
- investment objects such as horses, teak, whiskey, gold, wine, etc.;
- real estate;
- CO2 emission rights; and
- oil, gas, minerals;
- the vast majority of AIFMs has policies to combat money laundering and terrorist financing;
- a large part of the AIFMs always performs risk assessments covering their investors as part of their client due diligence investigation under the Wwft;
- almost half of the AIFMs have not yet drawn up expected transaction profiles; and
- the reporting of unusual transactions by AIFMs to the Financial Intelligence Unit Netherlands is not yet up to standard (e.g. more specific money laundering and terrorist risks resulting from risk assessment should be taken into account and translated into suitable and specific detection rules and limits).
In the context of sanctions compliance, the AFM notes that 85.6% of the AIFMs have indicated to use at least one sanction list when screening their clients. 61.3% of the AIFMs make use of services provided by third party service provider in this regard. In 86.4% of the cases the AIFMs always screen their clients prior to the provision of services, and in 61.1% of the cases screening also take place periodically. The most commonly used sanctions list are:
- the national sanction list terrorism (used in 79.1% of the cases);
- EU sanctions lists (used in 75.3% of the cases);
- UN sanction lists (used in 65.5% of the cases).
The AFM notes that AIFMs should be screening their clients against all of three sanctions lists (and not only one or two).
With regard to the training requirements that apply for AIFMs, the AFM indicates that AIFMs must ensure that all employees and daily policymakers of AIFMs are familiar with the Wwft (in particular the client due diligence and transaction monitoring requirements). According to the AFM improvement is particularly needed when it comes to the training of AIFMs’ daily policymakers.