Recently-issued anti-money-laundering guidelines from Luxembourg's Commission de Surveillance du Secteur Financier or CSSF require all regulated funds to appoint people to two jobs at board and control levels - someone “responsable du respect des obligations” or RR and someone “responsable du contrôle du respect des obligations” or RC.

The guidelines - issued last November - fall into two parts, with the rules for investement funds supervised by the CSSF coming first. The RR can be the board of directors (or other governing body depending on the legal structure of the Fund) acting as a collegial body. Alternatively, the board may appoint one of its members as the RR. The Grand Duchy's AML authorities must be able to reach the RR at any time.

Meanwhile, the board of directors (or other governing body) of the fund in question must appoint the RC intuitu personae - a civil law personal service contract in which the person of one of the contracting parties is an essential term of the contract and the particular individual cannot be replaced.

Who can become an RR or RC?

The RC may be a member of the board with appropriate experience (see below) or, if the fund wants to appoint a third party as the RC, it must sign a contract with the RC personally or, if the contract is concluded with the employer of the RC, (i) the contract must name the RC, (ii) any replacement of the RC must be subject to the fund’s approval and (iii) the RC must acknowledge its appointment in writing.

This appointee can be chosen from among the staff of the designated Investment Fund Manager (IFM) of the fund (assuming that the fund has one). As a general rule, the RC must remain in Luxembourg, but under certain exceptional conditions, he/it might be located outside, if the IFM and its relevant staff member who acts as RC are not domiciled in Luxembourg.

At an Investment Fund Manager supervised by the CSSF for AML purposes, the RR can be the entire board of directors (or other governing body, depending on the legal structure) of the IFM acting as a collegial body or can be one of the members of such a board/governing body. The RC must be the compliance officer at an "appropriate hierarchical level" and must be in charge of the AML duties of the Investment Fund Manager.

The experience of the RR and RC

The CSSF wants every RR to have a good knowledge of the AML laws and regulations of Luxembourg and to be able to prove this to it (e.g. by producing qualifications and evidence of training and work experience) upon request. He/it must be knowledgeable about the investments and distributive strategies of the fund and the services that the IFM offers and must be available without delay upon contact by the AML authorities (if the RR is a collegial body, at least one of its members must fullfil this requirement).

With respect to the RC, the CSSF wants him/it to have the same good knowledge and expertise and availability. He/it must also have access to all internal documents and systems that he/it needs to perform his/its tasks. This condition is vital if the RC is not present in Luxembourg from day to day.  

Details of the skills and duties of the RC can be found in Articles 40 (3) to 43 of CSSF Regulation N° 12-02 of 14 December 2012.

A regulation that might increase demand for outsourced services

Various firms believe that the new rules are going to lead to a rise in demand for outsourced services among fund firms.

Kavitha Ramachandran, the head of business development and client management for Continental Europe at the Luxembourgeois fund giant Maitland, told Compliance Matters: "There’s no doubt that the latest CSSF AML guidance will help to reinforce Luxembourg’s prominent position as a leading hub for funds and alternative investments in Europe. We expect to see new players enter the market as structures around the new regulation take shape and we are fully prepared to help them navigate this environment."

When asked whether there had indeed been an increase in outsourcing so far, she said: "There has not been a massive increase so far. I would say that outsourcing to the AIFM (alternative investment fund manager) is something that we have seen.

"The CSSF is looking for responsibility at board level. When they clarified the RC role, they said it could be a third party. It could be an IFM or, as we at Maitland call it, a manco. The RC actually provides support to the RR, looking after policies and documents and interacting with the CSSF. We have compliance officers at our firm who have gained experience in other mancos. Typically the board as a whole takes the role of the RR."

Dave Kubilus, the managing director of managing company (ManCo) services, added: "In the light of new legislation from governing bodies, the regulatory landscape in Luxembourg is constantly changing. It’s vital that we evolve with it and adapt our services to meet the needs of our existing and future clients.’