On 3 October 2017, the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten, the AFM) issued a press release expressing its concerns about money laundering and terrorist financing risks run by alternative investment fund managers (AIFMs) that are exempted from the licence obligation laid down in the Act of Financial Supervision (Wet op het financieel toezicht) (the Press Release), so-called ‘light AIFMs’.
In the Press Release, the AFM states that it has asked light AIFMs to explain what measures they take to ensure that they are not consciously or unconsciously participating in money laundering or terrorist financing activities. On the basis of the answers that the AFM received, the AFM has concluded that most of the light AIFMs need to improve their compliance in this respect. The AFM states that, among other things:
- nearly half of the light AIFMs do not have a written policy for compliance with the Act on the prevention of money laundering and financing of terrorism (Wet ter voorkoming van witwassen en financiering van terrorisme, Wwft) and the Dutch Sanctions Act (Sanctiewet 1977). Such policy should set out the relevant internal procedures, including, but not limited to how it is assessed, whether a client falls within a certain risk category, what the risks are for the light AIFM to be involved in money laundering or terrorism financing and how such risks can be mitigated;
- although most light AIFMs do carry out customer due diligence on their clients, more than half do not carry out any form of due diligence on other business relations, such as the seller of real estate in which investments are made or the persons behind a start-up company in which investments are made; and
- light AIFMs need to be cautious when dealing with high-risk countries or clients located in such countries. When dealing with (parties in) such countries, the AFM expects that light AIFMs mitigate the heightened risk by, for example, taking additional measures.
The light AIFMs have received individual feedback setting out which aspects of their compliance need to be improved. The AFM emphasises that the results of this survey are also relevant to investment funds and investment firms. Therefore, the AFM urges that these undertakings verify whether their policies and procedures comply with the Wwft and the Dutch Sanctions Act, also in particular in view of the Fourth Money Laundering Directive.
View the Press Release (Dutch only), 3 October 2017.