Luxembourg Client Briefing: Update of AED’s AML guidance

1. Executive summary

Luxembourg investment funds are subject to the law of 12 November 2004 on the fight against money laundering and terrorist financing as amended (the AML Law). Accordingly, they must have an appropriate internal organisation to prevent money laundering and terrorist financing, inter alia a responsible for compliance with the professional obligations (RR) and a responsible for the control of the compliance with the obligations (RC)^[1].

The supervision of compliance with the AML Law is entrusted to the Comission de Surveillance du Secteur Financier (CSSF) for regulated investment funds and Luxembourg investment fund managers. The Administration de l’enregistrement, des domaines et de la TVA (AED) is responsible for supervising alternative investment funds (AIFs) that are not supervised by any other authortity under the AML Law (Unregulated AIFs).

After its guidance for RAIFs that has already been available for some time^[2], AED has recently published two FAQs that apply to other Unregulated AIFs (Other Unregulated AIFs). The AED emphasises therein that all Unregulated AIFs must identify the RR and the RC to the AED by providing dedicated forms and evidence of the appointment of RR and RC. This is required even if the alternative investment fund manager, general partner or another stakeholder related to the Unregulated AIF is already supervised by a different Luxembourg authority under the AML Law.

2. More about the AED FAQs

The AED has recently issued two FAQs, addressed to Other Unregulated AIFS notably “FAQ – Persons involved in AML/CFT for a Luxembourg Alternative Ivnestment Fund (“AIF”) supervised by the AED for AML/CFT purposes”^[3] (FAQ 1) and “FAQ – Clarifications regarding to a Luxembourg Alternative Investment Fund (“AIF”) supervised by the AED for AML/CFT purposes”^[4] (FAQ 2).

FAQ 1 explains the concepts of RR and RC and the qualification required from RR and RC. The RC is to be considered as the main contact for the AED.

FAQ 1 explains that the RC may be either a member of the AIF’s governing body or a third party RC. The appointment of a third party RC must be made based on an agreement with the RC or with his/her employer. In the latter case, the agreement must state the name of the RC and foresee that the RC may not be replaced without consent of the AIF.

Where the Other Unregulated AIF has appointed a foreign AIFM, the RC may be a staff member of that foreign AIFM. FAQ 2 is essentially identical with the FAQ published earlier in relation to RAIFs^[5]. The practice of the AED is thus quite similar to the practice of the CSSF for regulated investment funds.

FAQ 2 mentions that the AED has sent letters to some AIFs in which it asks these Unregulated AIFs to submit a RR_RC identification form together with supporting documentation about the appointment of RR and RC (board minutes or circular resolution) and the “AIF AML/CFT Questionnaire 2021”. FAQ 2 announces that the AED will send these letters also to Unregulated AIFs that have not received them. However, these Unregulated AIFs may already prepare and submit the documents mentioned above before being asked to do so by the AED.

[1] The AML Law imposes on investment funds essentially three obligations in its articles 3 to 5: 1) Customer Due Diligence (Obligation de vigilance, i.e. identification of the client, identification of the beneficial owner, to have a prodcedure for entering a new business relationship, record keeping & ongoing monitoring) articles 3, 3-1, 3-2 and 3-3 of the AML Law, 2) the obligation to have a an appropriate internal organisation (internal procedures, appointment of RR/RC, training of employees, risk analysis) and 3) the obligation to cooperate with the authorities.

[2] Reserved alternative investment funds according to the law of 23 July 2016 on reserved alternative investment funds.

[3] https://pfi.public.lu/content/dam/pfi/pdf/blanchiment/questionnaire-et-formulaires/questionnaire-vehicules-financiers-non-reglementes/rr-rc-identification-form/faq-aif-rr-rc.pdf

[4] https://pfi.public.lu/content/dam/pfi/pdf/blanchiment/questionnaire-et-formulaires/questionnaire-vehicules-financiers-non-reglementes/rr-rc-identification-form/faq-clarifications-aif.pdf

[5] https://pfi.public.lu/content/dam/pfi/pdf/blanchiment/questionnaire-et-formulaires/questionnaire-vehicules-financiers-non-reglementes/rr-rc-identification-form/FAQ-RR-RC-AED-Version-EN.pdf