the intermediary must generally disclose the name and residential address of the
‘ultimate beneficial owner’ (a term itself subject to many interpretations);
the intermediary must undertake that it holds the requisite verification documenta-
tion, that it will hold it for a prescribed period and that it will pass it to the fund
manager/TPA upon request.
Thus, eligible introductions do not really reduce the CDD obligation: they do, how-
ever, reduce the paper trail in terms of certified verification documentation. As noted
earlier, some TPAs will not apply investors’ funds until their AML requirements have
been satisfied, and if a sponsor or its sales intermediaries are not properly prepared
this can cause anger and confusion. Others will apply funds, but should their require-
ments not be satisfied within 30 or 60 days will forcibly redeem the investments. Still
others are looking into introducing additional charges for the time and effort spent on
chasing down CDD documentation. From this it is clearly essential that all parties
understand what is expected of them at the outset, and where the responsibility and
expense of meeting these growing requirements will lie!
3.10 Recognition regimes for foreign schemes
Regulators do not only have an interest in approving and supervising the schemes
operated in or from their own jurisdiction: they will also wish to oversee foreign
schemes distributed in that jurisdiction, and how this is done. The process is usually
referred to as ‘recognition’ (though other terms are also used).
In determining whether an overseas fund should be recognized, the regulator will
assess it against the benchmark of its own regime for approving or authorizing local
schemes. For example, it may assess foreign schemes against the criteria set out in
Section 3.2, with some flexibility allowed in recognition of the differing overseas laws
and terminology.
Where a regulator has agreed common standards with its counterpart in another
jurisdiction, there is often some ‘fast track’ process. Provided the foreign scheme man-
ager can demonstrate to the local regulator that the scheme falls within a particular
regulatory category in his home jurisdiction, and is therefore required to comply with
equivalent provisions and is supervised on an ongoing basis, the local regulator will
generally not subject that scheme to the detailed scrutiny which it would otherwise
An overseas fund which is not recognized in a given jurisdiction may not generally
be promoted direct to the public in that jurisdiction. Local distribution – if it is per-
mitted at all – will normally have to be carried out in accordance with the regime for
unregulated schemes. This may mean that it can only be promoted:
to existing participants in the scheme or (in some cases) to investors who can be
shown to be participating in schemes with similar investment objectives and risk
profile, or who have done so in the recent past;
to other licensed or authorized investment businesses. Depending on the licensing
regime in that jurisdiction, this may mean that the scheme can be promoted to
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