Anti-Money Laundering & Counter-Terrorism Financing
Must a fund management company conduct due diligence when distributing units in a collective investment scheme for a related corporation?
No, however MAS recommends that "a CMI should perform applicable CDD measures if in substance, the relationship or account is managed by an employee, officer or representative of the CMI in Singapore even though the account is booked in another jurisdiction."
Where the FMC purely distributes units in a collective investment scheme (“CIS”) managed by its related corporation (without financial advice), the FMC does not open an account with the customer. Neither is it providing financial advice or fund management services to the person. Although the FMC is allowed to distribute funds of its related corporation thanks to its fund management licence, it is doing so under an exemption from the requirement to hold a CMS licence for dealing in capital markets products (para. 2(1)(m) of the Second Schedule to the SF(LCB)R).
This distribution is dealing in capital markets products, not fund management. As a result, the FMC is not establishing business relations with an investor into a CIS managed by its related corporation. The investor also does not invest into an investment vehicle under the FMC’s fund management, but under the management of its related corporation and does thus moreover not qualify as a customer of the FMC under limb (a) of the definition of a customer under para.2(1) SFA04-N02. The FMC is not required to carry out CDD under limb (a) of para.6.3 SFA04-N02.
Also, the CIS entity is actually carrying out the transaction with the investor, not the FMC. This is the intention from the beginning. As a result, the FMC is not required to carry out CDD under limb (b)of para. 6.3 SFA04-N02. (Neither does the investor qualify as a customer of the FMC under limb (b) of the definition of a customer under para. 2(1) SFA04-N02.)