The European Commission has been urged by asset managers to reconsider new measures around anti-money laundering (AML) rules designed to identify beneficial owners.

According to the European Fund and Asset Management Association (Efama), any changes to the rules “have to be calibrated correctly and fit well within customer due diligence processes”.

Of particular concern to the association is the proposal to lower the current threshold for identifying beneficial owners, which stands at 25%.

While the EC has argued that this would bring more transparency to the ownership of assets and financial trusts, Efama states that lower or separate thresholds for certain industries would “overcomplicate identification and lead to unnecessary investigations of minority shareholders”.

The association also claims that additional rules proposed for collective investments “will not result in further clarity” on their investors’ beneficial owners.

Instead, argues Efama, the EC should consider that shares in funds are typically distributed via third parties under account structures akin to nominee accounts, and fund managers have no view of the end investors.

Furthermore, these account structures are already subject to AML and countering the financing of terrorism (CFT) rules and have been recognised by the Financial Action Task Force –the body which sets global standards for AML and CFT.

“In order to maintain efficient protection of the financial system against money laundering and terrorist financing, it is of the utmost importance that the framework aimed at combating illicit activities is risk orientated and acknowledges the specificities of each sector of the financial industry,” stated Evelyne Christiaens, chair of Efama’s AML Task Force.

It is not the first time that European fund managers have raised the subject of beneficial ownership of collective investments.

In 2021, a news media investigation into Luxembourg’s register of beneficial ownership concluded that around 80% of funds had no beneficial owners, leading to descriptions of “anonymous investment funds” buying up swathes of real estate.

But as Luxembourg's funds industry countered, Ucits funds typically have thousands of shareholders, none of which own anywhere near 25%.

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