How Should a Family Office Review a Fund's Anti-Money-Laundering Procedures?

Review a fund's anti-money-laundering process by tracing how investor identity and ownership information moves from intake through screening, monitoring, escalation, and record retention. The manager should explain who performs each step and how it oversees service-provider work.

Trace Investor Onboarding

Ask for a process map or policy summary showing what information is collected before an investor is accepted. Find out how the fund confirms identity, beneficial ownership, and source of funds where applicable. Ask how the process changes when an investor subscribes through a trust, company, nominee, or other intermediary, and who resolves missing or inconsistent records.

Clarify each provider's role. An administrator may collect documents; a bank or screening provider may perform checks. Ask what evidence the manager receives, who reviews it, and how the manager knows an account is ready for acceptance. Request a redacted sample checklist or a description of the system status that records completion. A provider's involvement helps when responsibilities and follow-up are clear.

Examine Monitoring and Escalation

Ask what events trigger a review after admission, such as a change in ownership information, a payment from an unexpected source, or a request to change payment details. Ask who receives an alert, who decides whether it needs escalation, and what record captures the review and its outcome.

Use questions that fit the fund's investor base and payment process:

• "Who confirms beneficial ownership when an investor uses an entity or trust?"
• "What happens when subscription funds come from an account that does not match the investor record?"
• "Who can clear an alert, and what evidence must be retained?"
• "How do you confirm that an outside provider completed the checks you assigned?"

The manager may be unable to discuss a particular investor or case. It should still explain its procedures and provide appropriate evidence that they operate. See which compliance records to request for ways to assess policy and review evidence.

Check That the Process Fits the Fund

Compare the described procedures with the fund's investor types, payment channels, ownership structures, and geographic activity. Cross-border ownership or operations may require added review. Ask who determines which rules apply and whether counsel or a compliance specialist reviews process changes. The manager should explain how staff receive instructions and where they can raise a concern outside informal messages.

Request a policy summary, the date of its last review, staff training acknowledgements, and a redacted example of how an exception is recorded and closed. Ask whether the manager has identified an unresolved process weakness and what steps are underway. If the answer conflicts with the fund documents or the manager cannot explain who owns a control, record the gap and request a written response. Have your attorney or compliance specialist assess legal requirements for the fund's structure and jurisdictions. For the wider control picture, see questions about the compliance program.

Checklist

• Map onboarding, ownership review, screening, monitoring, and record retention.
• Identify the manager and service provider responsible for each step.
• Request redacted evidence of completed checks and resolved exceptions.
• Ask how unexpected payment sources and changed ownership are handled.
• Record open issues and obtain a written explanation or substitute evidence.
• Ask counsel or a compliance specialist to assess applicable requirements.

Go deeper: How should a family office assess custody arrangements for a private fund?; What controls should prevent unauthorized trades or transfers?.

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Sources: How to Start a Family Office, The Family Office Book. Informational only, not financial, legal or tax advice.