CSSF clarification on the use of electronic money institutions and payment institutions by AIFs
On 18 October 2022, the CSSF published a clarification regarding the eligible entities for opening cash accounts concerning alternative investment funds (“AIF”).
The CSSF states that, based on its observations, some AIFs, particularly those having appointed as their single depositary a professional depositary of assets other than financial instruments (the “PDAOFI”), as defined in article 26-1 of the Law of 5 April 1993 on the financial sector, as amended, use or intend to use for the purpose of holding their cash accounts, the services of :
- An electronic money institution (the “EMI”) within the meaning of the Law of 10 November 2009 on payment services (the “Payment Services Law”). EMI is defined as a legal person that has been granted authorisation by the competent authorities of a Member State under Title II of Directive 2009/110/EC to issue electronic money. In Luxembourg, this refers to any legal person that has been granted authorisation to issue electronic money under the Payment Services Law; or
- a payment institution (the “PI”) within the meaning of the Payment Services Law, defined as legal persons or persons that have been granted authorisation following Articles 7 and 22 of the Payment Services Law to provide and execute payment services.
As a consequence of the preceding, the CSSF reminds that all cash of an AIF has to be booked in cash accounts opened (i) in the name of the AIF, (ii) in the name of their alternative investment fund manager (the “AIFM”) acting on behalf of the AIF, or (iii) in the name of the depositary acting on behalf of the AIF with an entity as specified under Article 19(7) of the Law of 12 July 2013 (the “AIFM Law”). In particular, as per point 18 of circular 18/697, a PDAOIF acting as depositary must ensure the appointment of one or more entities with which all cash of the AIF shall be booked in cash accounts.
Article 19(7) of the AIFM Law, Article 86(a) of the Commission Delegated Regulation (EU) 231/2013 and article 18(1) (a), (b) and (c) of the Directive 2006/73/EC provide that the only eligible entities (the “Eligible Entities”) qualified for the holding of cash accounts for AIF operation’s purpose are:
- a central bank ;
- a credit institution authorised per Directive 2000/12/EC; and
- a third country-authorised bank.
Therefore, AIFs for which an EMI or PI has been appointed to hold a cash account shall, as soon as possible but no later than 30 June 2023 :
- appoint a depositary within the meaning of Article 19(3)(i) of the AIFM Law; and
- appoint an Eligible Entity concerning such AIF’s cash accounts.
The CSSF forbids the set-up of new sub-funds of AIFs for which an Eligible Entity does not currently hold cash accounts. Any new AIF must ensure that an Eligible Entity will hold the cash accounts.
Please feel free to contact our investment management team concerning the completion of the qualification of your depositary.
AML/CFT supervision of unregulated alternative investment funds (excluding RAIFs) by the AED
The Luxembourg Registration Duty, Estate and VAT Authority (in French, l’administration de l’enregistrement, des domaines et de la TVA or “AED”) has under its anti-money laundering and counter financing of terrorism (“AML/CFT”) supervision Luxembourg alternative investment funds being unregulated and not supervised financial vehicles by any other Luxembourg supervisory authority (“unregulated AIFs”).
In such respect, the AED has recently added a specific section on its website regarding these unregulated AIFs (https://pfi.public.lu/fr/blanchiment/questionnaire/vehicules-financiers-non-reglementes/fia.html). Indeed, the AED requests the unregulated AIFs to complete and file:
(i) an identification form related to (a) the person responsible for the control of the compliance of the AML/CFT obligations at the appropriate hierarchical level (in French, “responsable du contrôle du respect des obligations” or the “RC”) and (b) the responsible for the compliance with the professional obligations as regards the AML/CFT (in French “responsable du respect des obligations” or the “RR”) (the “RR/RC Form”) (https://pfi.public.lu/fr/blanchiment/questionnaire/vehicules-financiers-non-reglementes/fia/rr-rc-identification.html) ; and
(ii) a yearly AML/CFT Questionnaire covering the financial year 2021 (the “Questionnaire”) (https://pfi.public.lu/fr/blanchiment/questionnaire/vehicules-financiers-non-reglementes/fia/aml-cft-questionnaire.html).
In order to correctly complete the RR/RC Form and the Questionnaire, the AED has published frequently asked questions and guidelines documents on its website.
Certain unregulated AIFs have received communication from the AED asking them to complete and file the RR/RC Form and the Questionnaire by 12 November 2022 at the latest. In case you have not received such a communication, it is recommended to anticipate AED’s request and, therefore, to prepare the RR/RC Form and the Questionnaire together and to submit such documents in advance to the AED. In addition, the RR/RC Form must be transmitted to the AED without delay in the following situations:
- Initial appointment of the RC and/or RR of the unregulated AIF; and
- Change of the RR and/or RC of the unregulated AIF.
As a general reminder, all Luxembourg investment funds and Luxembourg investment fund managers shall establish an AML_CFT governance framework (AML_CFT policy, risk assessments, appointment of RR/RC etc.).
Please feel free to contact our investment management team concerning the completion of the Questionnaire and the RR/RC Form or any further questions on this matter.
