Irish Funds

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Irish Funds Industry Association Limited trading as Irish Funds Registered in Dublin No.339784 VAT No. IE6359784T Directors: P. Lardner, B. O’Dwyer, T. Young.

4AMLD Consultation, c/o/ Financial Services Division, Department of Finance, Government Buildings, Upper Merrion Street, Dublin 2. DO2 R583 Response by e mail to 4thamlconsult@financegov.ie 4th March 2016 Re: 4th EU Anti-Money Laundering Directive and Funds Transfer Regulation- Public Consultation on Member State discretions Dear Sir/Madam, Irish Funds welcomes the opportunity to comment on this Consultation on Member State discretions and have set out below our comments on the questions of most relevance to the industry. Question Box 3 What are the views from the public on the level of access to the register of beneficial ownership for corporate and other legal entities. Do you think access to this register should be restricted as set out in Article 30(5), (a)-(c) or should access be extended to the public at large?

The level of access to the register of beneficial ownership for corporate / other legal entities should be restricted as set out in Article 30(5), (a)-(c) and should not be extended to the public at large. This will ensure that any person or organisation that can demonstrate a legitimate interest will have access. We see no legitimate justification for extending access to this information to the public at large and in the context of tiger kidnappings etc., we think that this may give rise to unnecessary risks without proven benefit. Extending access to the public at large is also likely to give rise to additional costs, again without proven benefit. The public at large has access to significant information concerning corporate entities under the Companies Acts 2014 and we do not see any justification for extending access to this additional information. Importantly, we do not see extending access to the public at large as adding any competitive advantage at national level, in fact we see competitive disadvantage in extending access to the public at large.

What are the views from the public as to whether the beneficial owners or controllers of companies should be able to apply, on a case by case basis, to restrict public access to some types of personal information such as - residential addresses or dates of birth (article 30(9))? What categories of personal data might enjoy such exemption? What circumstances could justify the exempting of data?

If our views to the first question above are implemented, the second query is of less importance in that limiting access to those with a legitimate interest should reduce the need

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to restrict access generally. Nevertheless, our view is that beneficial owners or controllers of companies should be able to apply, on a case by case basis, to restrict access to some types of personal information.

The categories of personal data which might enjoy such exemption would be residential address and date of birth (as opposed to month and year of birth), however it will be important to ensure that in such circumstances information on the nature and extent of the beneficial interest held may not be restricted even where residential address and date of birth are restricted. The mechanism for restriction of access to information pursuant to Article 30 (9) should be robust and workable. Access to this information will be vital to the functioning of our financial services industry which will need to access this information for the purposes of completing customer due diligence checks. Such restriction should only be granted for compelling reasons and in the narrowest of circumstances and should require regular renewal.

It is difficult to give a meaningful response to this query when we are unclear as to what information will be required.

The circumstances which could justify the exempting of data would include actual and immediate risk of fraud, kidnapping, blackmail, violence or intimidation. We do not see that where the beneficial owner is a minor or otherwise incapable, this would constitute an automatic justification for an exemption.

Question Box 4 Views are sought as to the registration requirements for trusts under Article 31(4).

We believe that the registration requirements for trusts under Article 31(4) should not be more onerous than Article 31(1) requires. On the face of it, investment funds structured as unit trusts will be caught by the provisions of Article 31 and so the Trustees will be obliged to obtain and hold accurate and up to date information on the (a) settlor, (b) the trustees, (c) the protector (if any), (d) the beneficiaries or class of beneficiaries and (e) any other natural person exercising effective control over the Unit Trust. Under Article 31(4) as investors in unit trust (i.e. the beneficial owners) tend to fluctuate significantly, we urge that the legislation provide for the registration of classes of beneficiaries (such as "investors in xxx Unit Trust holding, individually, more than 25% of the fund"). Moreover access to this information is available to competent authorities and FIUs and obliged entities for CDD purposes but (unlike for the corporate register) not to an "organisation that can demonstrate a legitimate interest". We would suggest that in the interest of consistency in terms of register access that organisations that can demonstrate a legitimate interest should also have access to the public trustee register.

Views are sought as to the list of tax consequences that would result in a requirement to register under Article 31 (4). In considering this question a number of other matters in Article 31 need to be addressed as set out below -

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Clarity as to type of legal arrangements within the scope of the trust obligations

The Directive measures have been framed without including clear definitions of the trust arrangements in scope, thereby leaving this as a matter for each Member State to decide in their transposition of the Directive into local law.

Given the range of trust arrangements which are in place across a variety of commercial sectors in Ireland, Irish Funds recommends that, through definitions adopted in the legislative enactment and supporting guidance, trust arrangements in scope of the Directive’s measures are defined as precisely as possible. This is so as to afford the greatest possible certainty in the implementation of the Directive’s requirements.

Certainty on meaning of “express trust”

The Directive applies to “express trusts” (Article 31(1)); however, it does not define that term. Under common law, in order for an “express trust” to be validly constituted it must have three certainties: certainty of words, certainty of subject matter and certainty of objects. This requires that the wording used by the settlor (or testator) must indicate sufficiently that he intended to create a trust and did not intend to make a gift. Furthermore, the property of the trust must be clearly identified and it must be possible for the trustees or if necessary the court to be able to identify all the beneficiaries.

It should be noted that it is not necessary for an express trust to be constituted or recorded in writing (e.g. in a deed), thus arrangements entered into orally could constitute “express trusts”.

In order to give certainty, we would suggest that consideration is given to defining the term “express trust” for the purposes of the transposition of the Directive with a view to either confirming or modifying the common law meaning (as appropriate) and clarifying whether written and unwritten arrangements are covered.

Scope of application to “other arrangements”

There are a range of trust arrangements in place in business in Ireland which we consider might fall within the scope of the Directive. Article 31(8) also requires that the Directive’s requirements should apply to other types of legal arrangements having a structure or function similar to trusts. Depending on how this provision (Article 31(8)) is construed, it could significantly widen the scope of the Directive. Consequently, clarity on the precise scope of application of the measures – especially in the case of “other arrangements” - would be welcome.

Scope confined to trustees operating under Irish law

Article 31(1) provides that the measures should apply to an express trust governed under the law of Ireland. In particular confirmation as to whether this should be determined with reference to the residence of the trustees or the law governing the trust agreement / trust deed.

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Factors for consideration in the transposition of the Directive

Irish Funds has attempted to identify whether certain types of express trusts commonly used in the funds industry could be said to “generate tax consequences”.

Bare trusts

Trust arrangements where the trustee can be said, as legal owner, to be acting as a mere nominee for the beneficiary (bare trusts). In a bare nominee situation, the settlor and the beneficiary under the trust arrangement are one and the same person.

Bare trusts can be said not to generate “tax consequences” because placing an asset under the trust arrangement does not result in a disposal or transfer which is recognised for Irish tax purposes. Income or capital gains arising in respect of assets held under the bare trust are, under Irish tax principles, taxed upon and in the name of the beneficiary. There are, however, a range of tax information reporting requirements placed upon trustees or nominees holding assets on behalf of beneficiaries. These require the trustee or nominee holding the assets on behalf of the beneficiary to annually report to the Irish Revenue Commissioners (“Revenue”) details of income and gains on the assets and details related to the beneficiaries. In this manner, Revenue has information available to enable the collection of taxes on the income and gains on assets which are taxable upon the beneficiaries where the beneficiaries do not otherwise pay the taxes due.

Although these type of trusts might be said to not generate “tax consequences” under Irish tax principles, it does not necessarily follow that all types of bare trust arrangements operate in equivalent environments from an AML risk perspective.

Common examples of the use of trustee arrangements in the funds industry would include nominees holding of financial assets (such as cash in bank accounts, shares and other securities, etc.). Typically these include banks, custodians / depositaries, stockbrokers and other investment management intermediaries. In these situations, the settlor and beneficiary are one and the same person there is no economic transfer of ownership in the course of setting up the trust arrangement. Consequently, disclosure in a central register would not create insight on source of wealth for AML purposes (the central register does not require details of the type or value of assets held under the trust) albeit the information may be of use to competent authorities and FIUs in collating information for their AML activities.

Another example is the use of a trust arrangement for the specific purpose of enforcing or enabling collective actions amongst a class of loan note or other security holders. In these situations, the trustee function is typically performed by a financial institution acting as paying agent or by a bank. These trust arrangements arise in the context of the wider fiduciary/trustee obligations of a paying agent/custodian bank. A cost-benefit analysis of collection information on these arrangements should be considered in the context of other AML procedures and obligations that apply to persons performing trustee services within recognised clearing systems for holding bonds and similar instruments

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In addition, it is not unusual to have a security trustee appointed under credit arrangements in order to facilitate enforcement of security rights over assets which are held by a creditor or lender in a structured finance arrangement (with the legal ownership of an asset vested in a trustee which acts upon the direction of the creditor in the event of default). The purpose of such trust is not to hold or create wealth but instead to enforce contractual obligations under financing arrangements. It is suggested that this type of arrangement should not come within scope of the central register requirements

Another common situation in the funds industry is the use of a power of attorney over monies in a bank account to make specified payments from the account. This can arise where a paying agent may be given power of attorney to operate bank accounts holding client monies in order to bring to account payments on behalf of its clients. It is suggested that a power of attorney should not be considered an express trust within the context of the Directive requirements.

In summary, the inclusion of bare trusts of a kind described above in the central register would create a significant additional burden for the Irish funds industry and would result in the imposition of significant additional costs and administration. Given the nature and purpose of the trust arrangements identified above and the persons who typically act s trustees in those arrangements, Irish Funds suggests that there would be little additional benefit of requiring the disclosure of such trusts through the central register.

Tax exempt unit trusts

Other types of trust arrangements which can be said not to generate “tax consequences” are those which are expressly exempt from tax in relation to income and gains arising under the trust. The tax exemption is usually conditional upon the trust obtaining approval from the Revenue Commissioners of its tax exempt status and upon operating within prescribed guidelines in order that it continues to benefit from the tax exemption.

From Irish Funds’ perspective, there are two forms of exempt unit trust which should be considered as part of this consultation; these are discussed below. The introduction of reporting requirements for these types of trust will create a significant additional administrative burden for the Irish funds industry. This is particularly the case for widely held unit trusts (which are common in the regulated fund space). As discussed below, the AML risk for such categories of unit trust should be significantly mitigated by virtue of the regulatory regimes applicable to the funds and / or their beneficiaries. Under these circumstances and given that the tax exempt status of these unit trusts means that they should not be viewed as giving rise to tax consequences, the cost-benefit analysis would suggest that there is a good basis to exclude such funds from scope of the Directive (as transposed into Irish law).

Regulated unit trusts

Firstly, there are regulated funds which are constituted as unit trusts under the Unit Trust Act, 1990. Such funds are authorised to act as a collective investment undertaking under

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the supervision of the Central Bank of Ireland. They are regulated in like manner to other regulated funds including those formed as companies incorporated under Part 24, Companies Act 2014 (“Investment Companies”) and bodies corporate formed under the Irish Collective Asset-management Vehicles Act, 2015 (“ICAVs”). These types of unit trust derive their tax exemption from their regulated status and are exempted from tax on the same basis as Investment Companies and ICAVs i.e. pursuant to Chapter 1A, Part 27, Taxes Consolidation Act, 1997.

In considering AML aspects related to these regulated, tax exempt unit trusts, it could be said that the basis for tax exemption and the regulatory framework under which such trusts operate i.e. being authorised by the Central Bank of Ireland, significantly reduces/eliminates the risk of monies held under the trust being used other than for approved purposes i.e. reduces the risk that such tax exempt trust arrangements could be used for money laundering purposes.

In the case of unit trusts which are authorised by the Central Bank of Ireland, given the extent of the existing regulatory oversight, it is suggested that consideration might be given to excluding Irish regulated funds in the form of authorised unit trusts from the central register for trusts.

If a full exclusion is not considered appropriate, it is suggested that as these trust arrangements operate in an equivalent manner to regulated funds in corporate form (i.e. Investment Companies and ICAVs), the inclusion of such trusts on the central register is legislated for on an equivalent basis as the disclosure of beneficial ownership that is to apply to corporate forms of trusts. This would result in the inclusion of relevant details in the central register where there are one or persons who hold a 25%+ beneficial ownership in the trust (with the details of persons with a lesser interest not being disclosed).

Unregulated unit trusts

The second type of tax-exempt unit trusts which arise in the funds industry are also formed under the Unit Trust Act 1990. However, these unit trusts are not authorised by the Central Bank of Ireland. Consequently, their basis for tax exemption is not derived from their regulatory status and is, instead, specifically legislated for under Section 731, Taxes Consolidation Act, 1997).

These unit trusts are normally used where a number of pension funds and / or insurance companies wish to invest in and hold one or more investment assets collectively. As such, they are not widely used. It may be considered that there is a reduced money laundering risk (and, indeed, limited usefulness of the information which would be disclosed) where all of the unit holders in the unit trust arrangements are themselves regulated entities such as insurance companies (in respect of pension or life policy interests) and/or Revenue approved pension funds.

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Conclusion

In conclusion, Irish Funds recommends that the transposition of the Directive into Irish law should be implemented in a manner which gives clarity as to what the term “express trust” is to mean for the purposes of the legislation and also specifies what other types of legal arrangements having a structure or function similar to trusts (if any) are to be within the scope of the legislation. The legislation should also clarify whether the reference to “trusts governed under Irish law” refers to trusts with Irish trustees or trusts where Irish law governs the trust agreement / trust deed.

In addition, it is Irish Fund’s view that bare trust arrangements of the type described above should be excluded from the requirements to be recorded in the central register on the grounds that they do not generate “tax consequences” (due to their bare nature) and, from an AML perspective, represent a low risk of money laundering due to the circumstances and nature of the trust arrangements.

The inclusion of such bare trusts in the central register would create a significant additional burden for the Irish funds industry and would result in the imposition of significant additional costs and administration in what is a highly competitive international industry.

Irish Funds also recommends that unit trusts which are authorised by the Central Bank of Ireland (and, as such, they and their beneficiaries are subject to extensive regulation and AML oversight) should be excluded from the requirement to be recorded on the central register on the basis that their tax exempt status means that they do not generate “tax consequences” and, from an AML perspective, represent a low risk.

If a full exclusion is not considered appropriate, it is suggested that as these unit trusts should be treated in like manner as corporate funds which are subject to the same authorisation by the Central Bank of Ireland. This would limit inclusion in the central register to those authorised unit trusts which have one or more 25%+ beneficial owners.

In the absence of doing this, the introduction of the reporting obligation would create significant reporting requirements for the funds industry in Ireland in respect of one class of regulated product (unit trusts) which would not apply in the case of other investment products which are subject to identical regulation (i.e.. Investment Companies and ICAVs). Given the extensive regulations applied to all such vehicles the inclusion of such categories of unit trusts in the central register of trusts would, in our view, generate little additional benefit.

Finally, Irish Funds recommends that consideration is given to the exclusion of other forms of Irish unit trusts where the beneficiaries of the unit trust are themselves regulated entities.

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Question Box 5 What are the views from the public on the discretion to allow obliged entities to mitigate risk through group structures ?

Our views on the discretion to allow obliged entities to mitigate risk through group structures are that it is imperative that Ireland exercises this discretion in the interests of efficiency, streamlining processes, avoiding replication, financial inclusiveness, avoiding re-risking and common sense. From a risk perspective, the discretion is limited in that it is only possible to exempt branches and majority-owned subsidiaries of obliged entities established in the Union from that prohibition where those branches and majority-owned subsidiaries fully comply with the group-wide policies and procedures in accordance with Article 45.

Question Box 8 Are there any other issues related to the transposition of 4AMLD and FTR that you wish to outline?

As a general point, we believe that the quality of the legislation resulting from the transposition of 4AMLD and FTR will be improved by detailed consultation with representatives of the relevant financial services sectors together with the circulation of draft legislation at an early stage to allow thorough review and informed comment. This detailed consultation may also assist in avoiding legislation which may have unintended consequences on specific financial services sectors.

We strongly recommend that during the transposition process that the drafters seek put in place mechanisms for regular and comprehensive consultation with their counterparts in other Member States in order to promote as much consistency as possible. Within the international fund industry, the regulations of Ireland, Luxembourg and the United Kingdom are often compared with each other. We believe that consistent anti-money laundering regulations are critical to reduce possible confusion amongst international investors who often invest in different funds domiciled in different Member States and who wish to standardise the provision of anti-money laundering documentation. Consistent anti-money laundering regulations will also help avoid the risk that international investors, in order to reduce their administrative burden, favour one jurisdiction over another due to a perceived lighter burden for provision of information and documentation.

We believe that the drafters should take the opportunity when transposing 4AMLD and FTR to reduce identified inconsistencies with other jurisdictions in previous AML legislation. In particular, we note that s33(8) of CJA 2010 differs in drafting with the equivalent Luxembourg legislation. In addition, the Luxembourg and UK AML guidelines require monies to be frozen where sufficient AML documentation cannot be obtained. Some regulatory discussions in Ireland have suggested the money should be paid back to the bank account of record in such circumstances in order to terminate the business relationship which we believe is inappropriate as it may actually assist money laundering. We believe the freezing of monies until CDD is completed is a more appropriate and effective mitigate against potential money laundering.

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Irish Funds recently submitted a response to the European Supervisory Authorities consultation paper on the Risk Factors Guidelines and we believe some of the points raised in this response are relevant to the transposition of 4AMLD and FTR as follows:

o We believe that it would not be reasonable to expect firms to obtain and assess information for all the Annex 1, Annex II and Annex III risk factors for all customers (or fund investors). Firms should, as part of their holistic risk-based methodology, determine which factors should be assessed for different customer and risk scenarios.

o We believe that, that Firms should, as part of their risk-based methodology, have the

flexibility to decide whether or not specific existing customers should be required to provide additional documentation and information in order to meet any higher requirements introduced by the new legislation. We do not believe that a requirement for all existing customers to provide additional documentation and information would be pragmatic or justified on a risk assessment basis. Given the number of customers serviced by the European financial services industry, corresponding with each to obtain additional information would be an enormous task and lead to significant additional costs which ultimately would need to be passed onto the consumer.

o We note that, ESA’s Risk Factors Guidelines appear to suggest that all third

countries should automatically be treated as higher risk than EEA countries. We believe that the discontinuation of the “European Member States’ list of equivalent jurisdictions” is unfortunate and that the legislation and supporting guidance should provide greater clarity on circumstances where third countries could be considered to be low risk and consistent with EEA countries.

o We recommend, with reference to Annex III, which states that companies that have nominee shareholders or shares in bearer form may indicate potentially higher risk, that Guidelines for the new AML legislation acknowledge that use of nominee shareholders in investment funds is a very common practice and does not necessarily indicate “higher risk”. (We agree that in other industries, the use of nominee shareholders may often indicate higher risk). We attach in appendix 1 an extract from the Investment Funds Sectoral Guidelines which provides additional detail with respect to nominee and intermediary investors.

We suggest that ICAVs1 are in scope of Article 30 (1) as "other legal entities incorporated with in their territory". We suggest that Investment Limited Partnerships2 (ILPs) are not in scope as they are not incorporated and nor are they Trusts. Similarly Common Contractual Funds (CCFs) are not in scope of Article 30 or 31 as they are creatures of contract. Article 31 (8) requires that member states must ensure that the measures provided for in Article 31 apply to other types of legal arrangements having a structure or functions similar to trusts but we do not think this applies to ILPs or CCFs.

The information on beneficial ownership of corporates (Article 30) or trusts (Article 31) should be adequate and no more than is necessary for the purpose. We suggest that this

1 Irish Collective Asset-management Vehicles Act 2015 - SI 2 of 2015 2 Investment Limited Partnership Act 1994 – SI 24 of 1994

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might comprise; name, residential address, date of birth, place of birth, citizenship, (PPS numbers), the purpose of the structure of ownership (i.e. why the holding is not held directly) and the nature and extent of the beneficial interest held.

The mechanism for restriction of access to information pursuant to Article 30 (9) should be robust and workable. Access to this information will be vital to the functioning of our financial services industry which will need to access this information for the purposes of completing customer due diligence checks. Such restriction should only be granted for compelling reasons and in the narrowest of circumstances and should require regular renewal.

We urge that in the definition of "beneficial owner" at Article 3 (6)(a) (i), Ireland does not opt to exercise its power to decide that a lower percentage may be an indication of ownership or control.

We urge that in terms of access to the Trusts Register of Beneficial Ownership, Ireland opts to allow timely access by obliged entities, within the framework of customer due diligence in accordance with Chapter II. Irish Funds recommends that, at EU level, a simple mechanism be put in place so that entities which wish to show that they are obliged entities under the national legislation implementing 4AMLD may obtain an attestation to confirm this. This will also assist entities who hold such a register in identifying who may access their register. This would be akin to the UCITS attestation which an Irish UCITS obtains from its national competent authority (the Central Bank) and is recognised outside the EU (it is not necessary within the EU because of the UCITS passport).

We urge that, in the context of Article 5, Ireland does not choose to "adopt or retain in force stricter provisions in the field covered by this Directive to prevent money laundering and terrorist financing, within the limits of Union law." We believe that should be kept under regular review and can be revisited following the National Risk Assessment and implementation of the Directive.

We urge that Ireland avails of the option in Article 14 (2) to allow verification of the identity of the customer and the beneficial owner to be completed during the establishment of a business relationship if necessary so as not to interrupt the normal conduct of business and where there is little risk of money laundering or terrorist financing.

We urge that Ireland avails of the option in Article 14 (3) to allow the opening of an account with a credit institution or financial institution, including accounts that permit transactions in transferable securities, provided that there are adequate safeguards in place to ensure that transactions are not carried out by the customer or on its behalf until full compliance with the customer due diligence requirements laid down in points (a) and (b) of the first subparagraph of Article 13(1) is obtained.

We urge that Ireland avails of the option in Article 15 to allow obliged entities to apply simplified customer due diligence measures.

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We urge that Ireland avails of the option in Article 25 to permit obliged entities to rely on third parties to meet the customer due diligence requirements laid down in points (a), (b) and (c) of the first subparagraph of Article 13(1).

We urge that Ireland use its influence to ensure that EBA, EIOPA and ESMA issue guidelines on the implementation/application of these requirements so that a consistent and appropriate approach will apply throughout the EU.

We urge that a reasonable transition period be provided to allow for the fact that the introduction of the reporting obligation will create significant reporting challenges for the funds industry in Ireland and it may prove difficult and costly to obtain information on existing investors.

We urge, that due consideration is given to ensuring that local AML requirements are also consistent with local Irish tax regulations. In this regard we would reference Section 891c of the Taxes Consolidation Acts and in resect to international tax initiatives which have local impact we would reference the US Foreign Account Tax Compliance Act (“FATCA”) and also the similar initiative Common Reporting Standard (“CRS”).

Irish Regulated Investment Funds are pooled investment vehicles where the pooled monies are managed by an investment manager, under a discretionary investment management agreement and where individual investors do not typically play any part in the investment decisions. The vast majority of Irish Investment Funds are passive, with a dilute ownership and the investors have ceded control so that the actual persons with significant control are the board/ investment managers who make investment decisions in line with an Investment Fund's Prospectus wherein the investment strategy/objective of the fund is outlined. Shareholder consent is required for any material change of this investment strategy/objective. Typically these Investment Funds have variable capital, meaning that the capital of the Investment Fund increases or decreases depending on investors coming into the Investment Fund (i.e. subscribe and the capital increases) or exit the Investment Fund (i.e. redeem and the capital decreases). For this reason it is not possible to establish the percentage ownership in real time, it can only be calculated on an historical basis. We suggest that it would be practical to require no more than monthly updates to the register in the absence of any specific AML/CTF concerns to somewhat reduce the administrative burden.

We suggest that it may be useful to track UK proposals to identify "safe harbours" which are examples of what would not, in the normal course, result in a person being considered to be exercising control for the purposes of the Directive. Examples, in the context of investment funds would be

o Providing advice or direction in a professional capacity, for example, a lawyer, an accountant, a management consultant (including a company mentor) or a financial advisor.

o A third party commercial or financial agreement, for example, a supplier, a customer, or a lender. Or presumably an investment manager or other service provider.

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o An employee acting in the course of their employment, including an employee or director of a third party, which is treated as a person with significant control over the company.

o A director of a company, including, a managing director, a sole director, a non-executive or executive director who holds a casting vote.

We hope you find these comments helpful, and we remain at your disposal to discuss the issues raised in this response further.

Yours faithfully,

Chief Executive

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Appendix 1

8. NOMINEE AND INTERMEDIARY INVESTORS

52. An investor would be considered to be investing as a nominee or intermediary where there is an

indication or assumption that the investor is transacting on behalf of its underlying clients rather than

transacting on its own behalf.

53. As detailed in the Core Guidelines, in conducting a risk based assessment of such investors, a

Designated Person must take into account whether there is a legitimate business reason for the use of

the account and whether the account is owned or controlled by a regulated financial entity that is a

‘Specified Customer’. Such analysis is a prerequisite to determining the appropriate level of customer

due diligence to be applied. In determining the level of CDD to apply the Designated Person should

consider the following (this list is not exhaustive):

i. whether the nominee or intermediary is a regulated financial institution;

ii. whether the nominee or intermediary is wholly owned by a parent company which is a

regulated financial institution;

iii. Whether the nominee or intermediary or its parent company is located in a designated

country.

54. Please refer to Appendix 3 for details on some sample nominee or intermediary scenarios that may

occur in the Fund industry; suggested CDD approaches that a Designated Person may wish to apply

are given. This is not an exhaustive list and FSPs would be expected to document and justify

approaches adopted.