In today’s investment landscape, compliance with Anti-Money Laundering (AML) and Know Your Customer (KYC) standards has never been more important. Investors, fund managers, and counterparties all expect robust safeguards to protect against financial crime and to maintain the integrity of investment structures. While the primary responsibility for AML and KYC sits with regulated financial institutions, trustees—particularly Security Trustees—play an important role in supporting these efforts.
The activities of a Security Trustee are not a regulated activity under the Financial Services and Markets Act (Regulated Activities Order) 2001. However, trustees frequently act as a central point of trust within an investment structure, holding security on behalf of investors. This position of responsibility means that trustees must remain vigilant to the risks of financial crime and support regulated parties in discharging their AML/KYC obligations.
At our firm, we are registered with HMRC under The Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017 (MLR 2017) (Firm Registration Number: XWML00000205793). This registration underscores our commitment to transparency, diligence, and the highest compliance standards applicable to trustee services.
While trustees are not responsible for investor onboarding in the same way as regulated fund managers or advisors, they contribute to AML/KYC in several key ways:
Verification of Parties Involved
Trustees must be satisfied with the identity of the issuer, borrower, or corporate entity whose obligations they are holding security for, ensuring proper documentation is in place.
Ongoing Monitoring
Trustees often have visibility over transactions linked to secured obligations. This allows them to flag unusual activity to the regulated entities responsible for AML oversight.
Information Sharing
Trustees cooperate with fund managers, administrators, and custodians by providing relevant documentation or confirmations needed for AML/KYC reviews.
Transaction Transparency
By acting as an independent holder of security, trustees increase confidence that the structure is transparent, documented, and subject to oversight.
AML and KYC compliance is not just a regulatory formality—it protects investors from reputational and financial risks. Trustees that are proactive about AML/KYC contribute to:
Enhanced investor confidence in the investment structure.
Greater transparency between issuers, borrowers, and investors.
Reduced risk of involvement in financial crime.
The role of a Security Trustee may not be a regulated activity under FSMA, but trustees nevertheless contribute to the integrity and resilience of investment structures. By being registered under the MLR 2017 and working closely with regulated financial institutions, trustees help ensure that investment projects are built on a foundation of trust, transparency, and compliance.
