AML and KYC Obligations (Finally) Imposed on Private Fund Managers

Introduction

The Financial Action Task Force (FATF) has finally imposed Anti-Money Laundering (AML) and Know-Your-Customer (KYC) obligations on private fund managers. This is a significant development in the fight against money laundering and terrorist financing, as private fund managers have traditionally been exempt from these requirements.

What are the new requirements?

The new requirements will apply to all private fund managers that manage assets for third parties. They will be required to:

• Develop and implement a written AML/KYC policy
• Conduct customer due diligence on all new and existing clients
• Monitor transactions for suspicious activity
• Report suspicious activity to the appropriate authorities

Why are these requirements important?

The new requirements are important because they will help to prevent private fund managers from being used to launder money or finance terrorism. Money laundering is the process of disguising the origins of illegally obtained money, and terrorist financing is the provision of funds to terrorist organizations.

Private fund managers are particularly vulnerable to money laundering and terrorist financing because they often deal with large sums of money and have complex investment structures. The new requirements will help to ensure that private fund managers are not used to facilitate these activities.

What are the implications for private fund managers?

The new requirements will have a number of implications for private fund managers. They will need to:

• Develop and implement a written AML/KYC policy
• Conduct customer due diligence on all new and existing clients
• Monitor transactions for suspicious activity
• Report suspicious activity to the appropriate authorities

These requirements will add to the cost of doing business for private fund managers. However, they are necessary to protect the integrity of the financial system and to prevent money laundering and terrorist financing.

Conclusion

The FATF's decision to impose AML/KYC obligations on private fund managers is a significant development in the fight against money laundering and terrorist financing. The new requirements will help to ensure that private fund managers are not used to facilitate these activities.