AMF Issues Guidelines on Risk-Based Approach to Combating Money Laundering and Terrorist Financing

Introduction

The French Financial Markets Authority (AMF) has issued guidelines on a risk-based approach to combating money laundering and terrorist financing in the asset management industry. These guidelines aim to help portfolio asset management companies identify, assess, and mitigate the risks of money laundering and terrorist financing in their investment activities.

Risk-Based Approach

According to the AMF, portfolio asset management companies are required to implement a proportionate approach to due diligence, taking into account the level of risk associated with each investment transaction. This means that the company should only perform minimal due diligence for low-risk investments and take additional and/or enhanced due diligence measures for high-risk assets.

Low-Risk Investments

For low-risk investments, such as shares or bonds traded on a regulated market in the European Economic Area (EEA) or equivalent third countries, portfolio asset management companies are required to:

• Identify the issuer
• Collect information justifying the low risk

High-Risk Investments

Conversely, when investing in high-risk assets, portfolio asset management companies are required to take additional and/or enhanced due diligence measures, including:

• Obtaining approval from a higher managerial level or executive body
• Collecting additional information and supporting documents about the business relationship, source of assets, and funds involved
• Intensifying constant due diligence measures

Real Estate Asset Due Diligence

Portfolio asset management companies specializing in real estate are required to perform due diligence adapted to the nature of their target assets. This includes conducting due diligence on counterparties to property acquisition and disposal transactions, taking into account factors such as product risk, country risk, and client risk.

Best Practices

The AMF recommends that portfolio asset management companies follow best practices when collecting additional information for high-risk investments, including:

• Identifying the identity of management and beneficial owners
• Collecting financial data to assess consistency with the company’s business

Recommendations

The AMF also recommends that portfolio asset management companies collect reliable information about private equity funds, specialized professional funds, or other private equity vehicles before investing.

Conclusion

By implementing these guidelines, portfolio asset management companies can help combat money laundering and terrorist financing while minimizing unnecessary regulatory burdens. The full document is available on the AMF’s website for further review.