AML/CFT controls applied to TCSP activities by certain IFMs

On 11 January 2023, the Commission de Surveillance du Secteur Financier (CSSF) published a press release, informing about the result of anti money laundering / combating terrorist financing (AML/CFT) controls applied to Trust and Company Service Provider (TCSP) activities by certain investment fund managers (IFMs) from November 2021 to January 2022.
Back on 20 July 2020, the CSSF published its first ML/TF sub-sector risk assessment (trust and company services provider activities) regarding specialised professionals of the financial sector providing corporate services (TCSP activities).
In this context, the CSSF’s UCI On-site Inspection department carried out a thematic review from November 2021 to January 2022 of the AML/CFT controls applied by IFMs in regard to their TCSP activities, ancillary to their principal investment fund management activity. The thematic review targeted different types and sizes of market participants and included four Luxembourg IFMs.
Main takeaways were that TCSP services mainly consisted in providing a corporate address and directorship services to entities directly linked to their investment fund management activity. AML/CFT controls applied by the IFMs to their TCSP activity are embedded in their general AML/CFT framework. The overall understanding of the risks associated with ML/TF linked to the IFMs’ TCSP activity as well as the related mitigation measures put in place by the entities inspected were satisfactory, despite certain unsatisfactory findings in particular in the area of customer due diligence and ongoing monitoring.
The inspection also revealed best practices, such as that the governing bodies should specifically be made aware of TCSP matters, despite these being ancillary activities. TCSP activity should be assessed individually in the IFM’s risk assessment, and AML/CFT procedures should be made with specific reference to the TCSP activity. The CSSF reminds IFMs of the importance to also capture such ancillary activity at the level of the risk appetite statement, the compliance monitoring plan and the annual AML report, in this case by making specific reference to the TCSP activity.