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International Securities Commissions Outline Anti-Money Laundering Requirements
Washington, DC, March 8, 2005 - In February, the International Organization of Securities Commissions (IOSCO) issued a report on mutual funds’ anti-money laundering responsibilities.
The report’s recommendations largely mirror U.S. anti-money laundering requirements and apply to all collective investment schemes (CIS), including mutual funds. The report recommends that each mutual fund develop and implement a written program reasonably designed to prevent it from being used for money laundering and terrorist financing. The program should be approved in writing by the directors of a fund company, and should include:
- the establishment of policies, procedures, and internal controls;
- an ongoing employee training program;
- an independent audit function to test the program for compliance; and
- appropriate compliance management arrangements.
The report also states that mutual funds have a responsibility to verify the identities of its investors and beneficial owners. Under the IOSCO approach, measures to identify and verify the identity of the investor, however, would examine the type of investor, business relationship or transaction, and the types of accounts opened by the CIS, to the extent reasonable and practicable.
In addition, the report notes that, in certain jurisdictions, a mutual fund might sub-contract its client due diligence procedures to another financial institution or service provider. In this regard, the report notes that while performance of these functions might be delegated, overall responsibility and potential liability cannot.
IOSCO’s Technical Committee is seeking comment on the report by May 18, 2005.
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