On August 23rd 2018, the CSSF issued Circular 18/698 on the authorisation and organisation of investment fund managers and anti-money laundering and counter terrorist financing in relation to transfer agents and investment fund managers (the “Circular”). The Circular immediately entered into effect.
The Circular replaces CSSF Circular 12/546 applicable to Luxembourg management companies and self-managed UCITS. It imposes similar requirements to those applying under 12/546 on Luxembourg alternative investment fund managers as well as enhances the requirements and provisions applicable under the CSSF Circular 12/546 regime. The Circular also applies to branches and representative offices established by Luxembourg investment fund managers in Luxembourg or abroad as well as to transfer agents with respect to anti-money laundering and counter terrorist financing provisions.
The Circular consolidates in writing what was already the practice imposed by the CSSF and provides some clarifications and a number of new requirements. The main changes introduced by the Circular are as follows:
- Clarification of eligible own funds and requirement to put in place a treasury management policy;
- Information about establishment of subsidiaries or acquisitions by investment fund managers;
- Number of mandates and time allocation of directors and conducting officers. List of mandates and time allocation should be filed annually with the CSSF;
- Clarification on corporate meetings, conducting officers meetings and records of the same;
- Requirements regarding the minutes of decisions of meetings of the different control functions;
- Clarifications regarding independence of directors from depositary;
- Investment fund managers should have at least a minimum of 3 full time employees in Luxembourg;
- Replacement of conducting officers should be foreseen in case it is needed due to absence of the conducting officer;
- Procedure to identify and manage IT risks;
- If a cloud system is used a “cloud officer” should be appointed amongst the employees;
- All the reports to be filed with the CSSF regarding internal controls are to be filed within 5 months after the end of the relevant fiscal year (instead of one month after the annual general meeting);
- Clarifications in relation to the organisation of the permanent risk management function, the risk management report and the risk management policy. Investment fund managers should follow the template attached as Annex I to the Circular;
- Clarification regarding partial delegation of risk management;
- Clarification in relation to the organisation of the compliance function;
- A conducting officer has to be in charge of complaints handling;
- Communication to the CSSF of the annual audited accounts and the management letter within one month of the AGM and at the latest seven months after the end of the fiscal year;
- AML and CTF measures to identify and measure the AML/CTF risks as well as measures adopted to mitigate them;
- AML/CFT compliance officer and AML responsible officer should be appointed and be employees of the investment fund managers, be based in Luxembourg and have sufficient time to dedicate to their task and should be communicated in advance to the CSSF;
- Obligations regarding AML/KYC: appropriate measures to identify and assess the AML risks and measures of vigilance on UCIs’ initiators, investment managers, investment advisors, assets of the UCIs and specific obligations when using distributors;
- Enhanced due diligence on nominees;
- AML report;
- AML liability of the investment fund manager is not affected in case of delegation;
- AML obligations on marketing intermediaries;
- Obligations regarding EMIR and MMF Regulation;
- Exchange of information between the investment fund manager and the depositary;
- Setup of a procedure on the delegations and details on initial and ongoing due diligence;
- Recommendations on the investment committees (if any) and conditions on the use of advisors; and
- Rules on the organisation of the distribution and valuation functions.
The Circular implies that the industry will have to make some efforts to conform to the obligations imposed on them.