KYC and AML
KYC (know your customer) and AML (anti-money-laundering) are the checks a fund performs on each prospective limited partner before accepting their subscription: verifying identity and beneficial ownership, screening against sanctions and politically exposed person lists, and documenting the source of funds, with records kept for audit and regulatory review.
Example
An LP that is a family trust subscribes for $2M. The fund collects the trust deed, identification for the trustees and beneficial owners above the ownership threshold, runs sanctions and PEP screening, and stores the results with the subscription documents.
Confused with
Accreditation. Accredited investor and qualified purchaser status are about whether the investor is permitted to invest in the fund. KYC and AML are about who they are and where the money came from.
Related terms
- LP portal (investor portal) An LP portal, or investor portal, is the secure website where a fund's limited partners log in to view their capital account statements, capital call and distribution notices, quarterly reports, tax documents and fund legal documents, replacing email and PDF distribution.
- Qualified purchaser A qualified purchaser is an investor who meets the Investment Company Act threshold, generally an individual or family company with at least $5 million in investments or an entity with at least $25 million, which a fund relying on the Section 3(c)(7) exemption must verify for every limited partner.
- Side letter A side letter is a bilateral agreement between a fund and a single limited partner that grants that LP terms beyond the limited partnership agreement, such as a management fee discount, most-favoured-nation rights, co-investment rights, excuse rights or additional reporting, and must be tracked and honoured in every subsequent calculation and notice.