Get clarity on where your capital goes

Asset KYC, also called Know Your Asset (KYA), is the due diligence a fund performs on the companies and vehicles it invests in, and on the parties around the deal. It covers identifying the asset and its beneficial owners, managers and legal representatives, screening them against sanctions, PEP and adverse media sources, and documenting the source of funds.

It depends on the jurisdiction. In Luxembourg, CSSF Regulation 12-02 requires a documented ML/TF risk analysis of investments, reviewed when events require it. In the UK, the JMLSG guidance treats portfolio companies, sellers and co-investors as AML customers of a private equity fund. Everywhere, sanctions law prohibits making funds available to sanctioned persons, which applies to every investment.

Usually the portfolio company or target and its beneficial owners, managers and legal representatives, any new holding company set up for the deal, the sellers of the shares and, depending on your policy, co-investors. For fund-of-funds investments, the same checks apply to the target fund, plus its manager and general partner, including whether the manager is regulated.

Before the fund is committed: once the investment is reasonably certain to go ahead, and before the fund is unconditionally bound to complete. After that, checks are repeated when something changes, for example a new shareholder, a transfer or a sale, and through ongoing screening for as long as you hold the asset.

Investment due diligence looks at the commercial, financial and legal case for a deal. Asset KYC looks at money-laundering and sanctions risk: who owns and controls the asset, where the money comes from and where it goes. Both are needed, and they are often run by different teams.