Financial Regulators Issue Guidelines on Risk-Based Approach to Combat Money Laundering and Terrorist Financing
New Regulations for Asset Management Industry in France
The French financial regulator, Autorité des Marchés Financiers (AMF), has released guidelines outlining a risk-based approach for combating money laundering and terrorist financing in the asset management industry. The regulations aim to strengthen the fight against these criminal activities in the French financial sector.
Guidelines Published on November 29, 2019
The AMF guidelines provide recommendations for portfolio asset management companies to assess and mitigate the risks associated with money laundering and terrorist financing. The regulations apply to companies whose securities are admitted to trading on a regulated market in France or another Member State of the European Union, the European Economic Area or a third country that imposes obligations equivalent to those of the “transparency” Directive.
Identifying and Assessing Risks
According to the guidelines, portfolio asset management companies must:
- Identify risks associated with money laundering and terrorist financing
- Assess these risks before concluding an investment transaction
- Classify risks as high, medium or low
The scope of due diligence will depend on the risk assessment. For example:
High-Risk Investments Require Enhanced Due Diligence Measures
In cases where the identified risk is considered high, the portfolio asset management company must take additional and/or enhanced due diligence measures, such as:
- Obtaining approval from a higher managerial level
- Collecting additional information and supporting documents related to:
- Purpose of the business relationship
- Source of assets and funds involved
- Intensifying constant due diligence measures
Low-Risk Investments May Require Minimal Due Diligence
On the other hand, where the portfolio asset management company chooses to invest in low-risk assets, such as shares or bonds traded on a regulated market, minimal due diligence may be required.
Best Practices for Collecting Additional Information
The AMF recommends that portfolio asset management companies follow best practices when collecting additional information, including:
- Collecting reliable information about:
- Identity of management and beneficial owners
- Financial data to ensure consistency with the company’s business
Real Estate Asset Due Diligence
The guidelines provide specific recommendations for real estate asset due diligence, emphasizing the need for adapted due diligence measures based on the nature of the target assets.
Strengthening Fight Against Money Laundering and Terrorist Financing
By implementing these guidelines, portfolio asset management companies can ensure compliance with regulatory requirements while mitigating the risks associated with money laundering and terrorist financing. The regulations aim to strengthen the fight against these criminal activities in the French financial sector.