AFM imposes fines on Revo Capital Management for infringements of Money Laundering and Terrorist Financing (Prevention) Act

The fine of €28,000 has been imposed because Revo failed to perform a risk assessment of the money laundering and terrorist financing risks for two investment funds under its management, and because these funds lacked a policy to limit and effectively control the risks of money laundering and terrorist financing. In addition, a fine of €125,000 has been imposed on Revo because it failed to ensure that the funds had in place appropriate procedures to determine whether their clients qualified as ‘politically exposed persons’ (PEPs).

Role of managers and ‘light’ managers

Revo is a registered alternative investment fund manager subject to the registration regime (the ‘light’ regime). These ‘light’ managers are exempt from licence requirements but subject to the AFM’s supervision regarding their compliance with the Wwft regulations. Under the Wwft, investment fund managers have the responsibility to act as gatekeepers to keep criminal money flows out of the financial system. 

Revo has failed to adequately fulfil this role. The AFM has found that the funds managed by Revo failed to meet various requirements under the Wwft up to December 2020. Consequently, the funds ran the risk of their services being abused for money laundering and/or terrorist financing.

Lack of risk assessment and ML/TF policy

Fund managers must ensure that the funds under their management identify and assess their money laundering and terrorist financing (ML/TF) risks. This risk assessment serves as the basis for the funds’ ML/TF policy, which should enable the funds to limit and effectively control the risks of money laundering and terrorist financing. Up to December 2020, the funds managed by Revo failed to perform a risk assessment and had no ML/TF policy whatsoever.

Inadequate risk control systems to check PEP status

Fund managers must also have in place procedures to determine whether their clients qualify as politically exposed persons (PEPs) because they hold or have held a senior public position. The reason for this requirement is that business relations with PEPs give rise to an increased risk of reputational damage, increased corruption risk, and increased risks in other areas. 

The AFM has found that up to December 2020, the funds managed by Revo did not have any policies or internal procedures to determine whether their clients were PEPs, nor did they otherwise have in place appropriate risk control systems to check their clients’ PEP status. 

Amounts of the fines

These infringements are punishable by fines with a basic amount of €500,000 (for the lack of a risk assessment and ML/TF policy) and €2,500,000 (for inadequate risk control systems to check PEP status), respectively. Given the seriousness and duration of the infringements, the AFM in this case increased the basic amounts by 25%. The relevant factors based on which the AFM decided to increase the fines included the fact that the investment funds mainly served clients with increased risk of money laundering and that the infringements continued for over two years. In view of the size of the company, the AFM has ultimately decided to lower the amount of the fines to €28,000 and €125,000, respectively. 

Interested parties can submit the AFM’s decision to the competent court for review.