Fund Manager's Role to Screen Investors for Money Laundering and Illegal Practices

Fund Manager's Role to Screen Investors for Money Laundering and Illegal Practices

December 20, 2023·LEIpapa
Is it the Fund Manager's Role to Screen Investors for Money Laundering and Illegal Practices? How an LEI can help with this obligation?
Fund Manager's Role to Screen Investors for Money Laundering and Illegal Practices

The Subject

The definition of money laundering and the application of anti-money laundering (AML) legislation can vary from jurisdiction to jurisdiction. Here you can find the Estonian MLTFPA. However, there are general requirements and common principles concerning AML legislation stipulated in the guidelines issued by the Financial Action Task Force (FATF) and these include checks not only on the investing entity but also for establishing who is the “beneficial owner” of the investing entity, to prevent the laundering of money through fund investments.

The Professional Standard

First of all, the Fund Manager is responsible for ensuring compliance with applicable anti-money laundering requirements.

Irrespective of considerations concerning compliance with the law, a Fund Manager should take care only to introduce reputable, long-term partners into the fund.

The Fund Managers should ensure that the fund documents require investors to provide any necessary identification information that they require to meet its policies and relevant regulatory and legal requirements, including providing documentation to the authorities during the life of the fund. Failure or refusal to meet this requirement should provide the Fund Manager with the right to require the investor to withdraw from the fund.

Legal advice should be obtained on this matter as early as possible to ensure that all relevant money laundering checks are undertaken and properly documented. Such checks must in all cases comply with the relevant local rules in the jurisdiction where the fund is domiciled as well as that from which it is administered. In addition, during fundraising (or subscription of investment units), steps should be taken to ensure that capital commitments are not made to facilitate money laundering. Investment should not be accepted where the source of the investment causes concern (e.g. where the investment originates in a FATF black-listed country) or the investment partner’s (or its beneficial owners’) identity either cannot be verified or is reasonably deemed an internationally sanctioned person or institution, or until further, enhanced due diligence is completed and confirms these factors are not an issue.

Subscription documents should include specific information and confirmation from investment partners in the fund regarding the origin of money invested, corroborated by appropriate documentation and supported by suitable warranties where applicable. The fund documents should enable the Fund Manager to require investment partners to update or expand such information, documentation, and warranties as applicable and provide the Fund Manager with the right to manage the situation if their failure to provide such information, documentation, and/or warranties impairs the ability of the Fund Manager and the other investment partners to carry on the business of the fund.

How an LEI can help to Fund Managers?

The Legal Entity Identifier LEI is a globally recognized alphanumeric code designed to improve financial system transparency and risk management. It plays a crucial role in identifying legal entities involved in financial transactions and, indirectly, in revealing beneficial ownership. Here’s how LEIs help with beneficial ownership:

Procedure Description
Unique Identification LEIs uniquely identify legal entities, simplifying tracking and reference.
Due Diligence LEIs aid due diligence by providing standardized, accessible entity information.
Data Records LEI records include ownership structure data, including shareholders, directors, and officers.
Global Network The Global LEI System (GLEIS) facilitates global tracking and ownership identification.
Regulatory Compliance Many jurisdictions require LEIs, often linked to beneficial ownership disclosure.
Anti-Fraud LEIs combat money laundering, fraud, and financial crime by verifying ownership details.
Third-Party Services LEI data is used by services for more in-depth due diligence.
Standardized Format LEIs use a standardized format, enhancing data integration and analysis efficiency.


LEIs contribute to financial transparency, helping regulators and organizations gain insights into beneficial ownership structures and detect potential financial misconduct.

Comprehensive due diligence and compliance efforts may involve additional sources of information, such as corporate registers, beneficial ownership registers, and customer-provided documentation. That’s why, at LEIpapa we are building the biggest and the most relevant registry containing all the data necessary for the development of business transactions between financial market participants and other legal entities.

In summary, Registering an LEI code with LEIpapa is essential for legal entities engaged in financial activities. It not only ensures compliance with regulatory requirements but also contributes to global financial transparency, risk management, and efficient financial transactions.


Who needs an LEI?

In general, an LEI number is required by any legal entity whose activities incorporate financial transactions. All legal entities, other than natural persons are eligible for LEI number obtaining.
More info…

Who can apply for an LEI?

As defined in ISO standard 17442, any legal entity that enters into a financial transaction is eligible for an LEI.
More info…

Who may NOT apply for an LEI?

An LEI may not be requested by any of the following:

  • Individuals;
  • Unregistered businesses and entities;
  • Operating divisions;
  • Branch offices within the same country as a head office with an existing registered LEI.
    More info…

How to search LEI codes?

LEIpapa has developed a free LEI Search application, so users can search within the whole LEI database.
More info…

Is the LEI data publicly available?

Yes. The Global Legal Entity Identifier Foundation (GLEIF) has published the Global LEI Index. It provides information, updated daily, on all LEIs issued to date. Any interested party can easily access and search the complete LEI data pool free of charge using LEIpapa LEI Search application or on the GLEIF website.

Will an LEI be the same for all classes of assets (bonds, mortgages, etc.)?

Yes. The LEI is a unique identifier for any given legal entity. It is not an identifier for instruments. As a result, that legal entity will use its LEI for reporting of any type of financial transaction it enters into regardless of the asset class or when the particular asset was issued.
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LEIpapa is an Official LEI Registration Agent and a partner of Ubisecure RapidLEI. We build the most reliable and transparent corporate data registry on Global LEI system.

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