What you should know about CSSF Circular 18/698
31st May 2021

The CSSF Circular 18/698 is significantly impacting how investment fund managers based out of Luxembourg are operating. Acolin has put together 10 important facts to help you get to grips with what is expected.

  1. Managers based out of Luxembourg must comply with Circular 18/698 by the end of May, 5 months following the end of the financial year.
  2. Circular 18/698 was published on 23 August 2018 and applies to all managers established in Luxembourg.
  3. The CSSF has clarified its expectation on the oversight of fund distribution channels which are founded on the latest EU anti-money laundering (AML) and terrorist financing controls directives.
  4. Oversight of direct and in-direct investors at the point of sales imposes obligations toward the oversight of registrar agents (“TA”) within the transaction and settlement process.
  5. Transparency is key with regards to the entire distribution channels from the managers to the end- investor.
  6. Execution of due diligence obligations has a strong onus on generally applicable “risk-based approach” already imposed by the EU AML law.
  7. Circular 18/698 specifies the obligations of managers with regards to the delegation of oversight and includes IT, compliance, internal audit and finance provisions.
  8. Managers must implement a range of complex oversight requirements for global distributors.
  9. Managers should evaluate whether to outsource delegation oversight to a third party, allowing them to benefit from not only an existing infrastructure, but also highly experienced staff.
  10. Investing in digitalisation is a must-have and essential to gain a competitive advantage in the current market environment.