Private Fund Investors Up Focus on Anti-Money Laundering Controls
Private fund investors are raising the bar for alts managers to ensure they have robust compliance functions, particularly anti-money laundering, or AML, controls, according to a new survey.
But while reliably implementing these practices is becoming table stakes for hedge funds, private credit managers and others alternative shops in a highly competitive fundraising environment, not all of them are meeting the challenge. […]
Limited partners, or LPs, are already voting with their feet. Nearly nine of out 10 LPs say they have turned down or reconsidered allocations to private funds because of AML/KYC-related concerns, according to the CSC survey, which interviewed 200 LPs and 200 managers globally.
“The delay of the rule has led some managers to cease their focus on these AML procedure updates, while others have made certain updates while not addressing all of the provisions that were included in the rule,” he said. Most alts managers take compliance seriously, but adopting compliance policies that are not strictly required – or required yet – also can create regulatory risk, particularly if the firm isn’t fully resourced from a staffing, technology and operational perspective, said David Goldstein, direct of fund services at STP Investment Services.
“Many exempt reporting [managers] elect to adopt core policies that cover their regulatory obligations, including antifraud provisions, marketing policies and regulatory filing policies, without adopting [in] full the [1940] Adviser Act programs required of registered firms,” Goldstein said. “Alts investors look for this in conducting their own due diligence when going through the investment making decision.”
Read more in FundFire.
