The Investor Experience: Managing Your Transfer Agent’s AML and Sanctions Program

August 22, 2023
  • Investor Services
BBH’s Amy Morris explains how the transfer agent’s AML/Sanctions program can help the fund and asset manager mitigate risks effectively while providing a best-in-class experience for their investors.

The pace of regulatory change is not slowing.

  • In June, global money-laundering watchdog the Financial Action Task Force (FATF) added Cameroon, Croatia, and Vietnam to the “grey list” of jurisdictions that are subject to increased monitoring.1
  • In March, five new countries were added to the European Commission’s list of high risk third countries.2
  • In February, FATF added Nigeria and South Africa to its list of jurisdictions under increased monitoring.3
  • In the same month, the EU added British Virgin Islands, Costa Rica, Marshall Islands, and Russia to its list of non-cooperative tax jurisdictions.4 As well as being added to that list, Russia was suspended from FATF membership.5

At the same time, regulators are increasing their pressure on fund managers to quickly act on these changes. Delegating certain day-to-day Investor AML/Sanctions activities to a transfer agent (TA) can help the fund manager navigate regulatory change effectively, but they are still responsible for how their organization responds.

What best practices would you advise a fund manager to follow to get the most out of their TA partnership?

The fund manager ultimately owns the regulatory obligations and risk. They also need to be mindful of the potential impact of shifting regulations on their investor experience. It’s important that they play an active role when outsourcing AML/Sanctions activities.

We’ve observed the following best practice characteristics among our fund manager clients: 

  • Open to recommendations and expert advice
  • Dedicated senior contact person who can make AML/Sanctions risk decisions
  • Connectivity between Compliance, Business and Distribution functions in-house
  • Willingness to collaborate with the TA on risk-based requirements

What AML/Sanctions program elements should a fund manager look for in a TA partner?

A truly global TA with a global TA AML/Sanctions program can help fund managers meet regulators’ expectations and mitigate risk, while helping the manager grow their assets. Helping clients comply with regulatory change is table stakes, but a truly differentiated TA partner that facilitates a smooth investor relationship should offer the benefits of:

  • A dedicated team that proactively monitors regulatory and industry developments that affect TA services and the documentation required of investors
  • Proactive, timely communication around regulatory change
  • Framework for collaboration on new requirements impacting the TA’s AML/Sanction program
  • Delivery of practical and scalable approaches to meeting regulatory requirements supported by access to the TA’s AML experts
  • Products and technology to provide real-time oversight and automate processes

How does BBH ensure that fund managers can adapt to a high volume of regulatory change while protecting the investor relationship?

While some regulatory changes can impact the fund manager’s investors in terms of the documentation required of them, most of it can and should be a seamless part of their onboarding into the fund. It should be handled in a way that minimizes the impact on investors. At BBH, we identify and manage regulatory and industry change to ensure compliance but also to minimize the impact to the investor experience.

Our differentiator is proactive partnership with our clients to navigate these regulatory changes.

Through our TA AML/Sanctions and Regulatory Product team, we communicate regulatory change affecting our services to clients on a regular basis through newsletters called T-UPs. This kind of timely communication from the TA to the fund manager, supplements the client’s independent obligations, underpinned by a dedicated approach to identifying and assessing regulatory and industry developments. This helps the manager to:

  • Navigate the ongoing regulatory developments successfully
  • Minimize risk of non-compliance
  • Position themselves well with their own regulator
  • Free up time to allow them to focus on growing its business

In addition, BBH’s TA AML/Sanctions program is set up to take regulatory change from words on a page into operational practice through:

  • Written procedures
  • TA AML/Sanctions training programs
  • Digital tools to track investor AML/KYC document requirements
  • A platform for digitized investor onboarding
  • Custom TA AML product solutions

For more information, please contact Amy Morris or any of our TA AML/Sanctions experts.

BBH can provide transfer agency services to fund products established in Luxembourg, Ireland, U.K., U.S., Cayman, Bermuda and Hong Kong. Click here for more information.

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1 FATF press release: https://www.fatf-gafi.org/en/publications/Fatfgeneral/Increased-monitoring-june-2023.html
2 The Democratic Republic of Congo, Gibraltar, Mozambique, Tanzania and the United Arab Emirates were identified as having extreme deficiencies in their AML and countering the financing of terrorism regimes. Press release: https://finance.ec.europa.eu/financial-crime/high-risk-third-countries-and-international-context-content-anti-money-laundering-and-countering_en
3 FATF press release: https://www.fatf-gafi.org/en/publications/High-risk-and-other-monitored-jurisdictions/Increased-monitoring-february-2023.html
4 European Council - Council of the European Union press release: https://www.consilium.europa.eu/en/press/press-releases/2023/02/14/taxation-british-virgin-islands-costa-rica-marshall-islands-and-russia-added-to-eu-list-of-non-cooperative-jurisdictions-for-tax-purposes/
5 FATF press release: https://www.fatf-gafi.org/en/publications/Fatfgeneral/fatf-statement-russian-federation.html

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