EU AML Package: Proposed CDD Rules for Fund Distribution through Financial Intermediaries

Introduction

A key question for collective investment undertakings (CIUs) when considering the customer due diligence rules under Regulation (EU) 2024/1624 (AMLR) is how customer due diligence (CDD) should operate where fund units or shares are distributed through a financial intermediary acting in its own name for underlying investors.

This Briefing Paper explores the currently proposed new rules for CIUs which are contained in AMLA’s[1] Final Report on draft regulatory technical standards (RTS) on CDD developed under Article 28(1) of AMLR[2] (draft RTS).

The treatment of financial intermediaries for CDD purposes by CIUs has been a matter of debate during the development of the draft RTS. We are aware of recent Industry push-back to AMLA on the position adopted in the draft RTS. It remains to be seen whether the proposed approach described in this briefing will be retained in the RTS as finally adopted.

What is the Existing Framework?

The existing framework comprises Directive (EU) 2015/849, as amended, national implementing legislation and the EBA’s ML/TF Risk Factors Guidelines (EBA/GL/2021/02, as amended) (Guidelines). The Guidelines distinguishes between several fund-distribution models. In low-risk situations where the intermediary is the CIU’s customer, and to the extent permitted by national law, the Guidelines permit simplified treatment subject to conditions concerning the intermediary’s AML/CFT obligations, effective supervision, the relationship’s risk, the adequacy of the intermediary’s CDD and immediate access to underlying-investor CDD information and documents on request.

What are the Proposed New Rules?

Article 20(1)(h) of AMLR requires obliged entities, where a transaction or activity is conducted on behalf of or for the benefit of natural persons other than the customer, to identify those natural persons and verify their identities.

This requirement is distinct from the obligation to identify the CIU’s own beneficial owners, for which Article 61 of AMLR provides a separate test.

In an intermediary distribution arrangement, in which a CIU distributes its shares or units through another credit institution or financial institution acting in its own name but on behalf of underlying investors, this raises the question whether, and how, the CIU must “look through” the intermediary (as the CIU’s customer) to identify and verify underlying investors falling within that provision.

Article 15 of the draft RTS proposes to answer this question for CIUs. As per the new draft Article 15, a CIS is not required to look through to the underlying investors of the financial intermediary, in circumstances where all four of the following conditions are met:

• The intermediary is subject to AML/CFT obligations in a Member State or in a third country whose requirements are at least equivalent to those stipulated by the AMLR.

• The intermediary is effectively supervised for compliance with those obligations.

• The risk associated with the relationship with the intermediary is not high.

• The CIU is satisfied that the intermediary applies robust and risk-sensitive AML/CFT controls, including CDD, to its own customers and their beneficial owners.

Article 15 does not relieve the CIU of its CDD obligations towards the financial intermediary, which remains its customer. Where any of the conditions is not met, the CIU cannot rely on Article 15. The CIU must then meet Article 20(1)(h) AMLR directly, which in practice will usually require it to look through to the underlying (natural persons) investors. Where the relationship is high risk, the CIU must also apply enhanced due diligence measures under Article 34(4) AMLR.

Could the Proposed Rules Change?

Yes. The draft RTS must first be adopted by the European Commission as a Commission Delegated Regulation supplementing the AMLR. It will then be subject to scrutiny by the European Parliament and the Council before publication in the Official Journal of the European Union. The Delegated Regulation will enter into force on the twentieth day after its publication in the Official Journal. It will apply six months after entry into force (except for provisions relating to football clubs).

What steps should a CIU, Fund Manco and a Fund Distributor take?

CIUs, management companies and fund distributors should review their distribution agreements, intermediary due diligence questionnaires and risk methodologies before the RTS start to apply.

Footnotes:
[1] Authority for Anti-Money Laundering and Countering the Financing of Terrorism (AMLA)
[2] AMLA’s Final Report on the draft Regulatory Technical Standards (RTS) under Article 28(1) of the Anti-Money Laundering Regulation (EU) 2024/1624 (AMLR) published on 30 September 2026