Streamlining International AML and KYC Compliance for Private Funds

Streamlining international AML/KYC compliance for private funds

Author: The Carta Team
Read time: 8 minutes
Published date: 20 November 2025

Understand the key anti-money laundering (AML) and know your customer (KYC) requirements for international funds, including operational processes and best practices for managing staying compliant.

What is money laundering?

Money laundering is the process of making illegally gained proceeds, or “dirty money,” appear to be from a legitimate source. This financial crime is often associated with other serious offenses, such as embezzlement, bribery, terrorist financing, fraud, and proliferation financing. The goal is to disguise the criminal origins of the money so it can be used without detection by law enforcement.

Criminals achieve this by moving funds through complex transactions, and private funds can be an attractive entry point for these proceeds due to their potential for high returns and anonymity. Ultimately, the laundered money is integrated back into the legitimate financial system, appearing as normal business profits or assets.

What is anti-money laundering (AML)?

Anti-money laundering (AML) refers to the complete set of laws, regulations, and internal procedures that a fund establishes to detect and report suspicious financial activity. The purpose of an AML program is to prevent your fund from being used for illicit purposes. A strong AML framework protects the fund's integrity, its investors, and its reputation within the financial ecosystem.

What is know your customer (KYC)?

Know your customer (KYC) is a specific and required component of your overall AML framework. It's the process of verifying an investor's identity and providing the information needed to understand who is investing in your fund, as well as the potential risk they might pose.

How AML and KYC function in fund operations

While related, AML and KYC serve distinct functions within your fund's compliance operations. KYC is the tactical, front-end task you perform when a limited partner (LP) subscribes to your fund. AML, on the other hand, is the continuous, strategic program that governs the fund from its formation to wind-down.

Key AML and KYC regulations for fund managers

Fund managers operating globally must navigate a complex web of AML, KYC, and other private market regulations that vary by jurisdiction. These are some of the key regulators and supervisory bodies to be aware of in APAC and MEA:

In the Asia-Pacific (APAC) region, key regulators include the Monetary Authority of Singapore (MAS), the Australian Transaction Reports and Analysis Centre (AUSTRAC), and Hong Kong’s Monetary Authority (HKMA).
In the Middle East, firms must adhere to rules set by bodies like the Abu Dhabi Global Market (ADGM) and the Dubai International Financial Centre (DIFC).
Other popular domiciles have their own rules, such as KYC/AML requirements for funds operating in the Cayman Islands.

The AML and KYC compliance process for private funds

To implement AML and KYC effectively, managers must execute a series of integrated actions at specific points in your fund's lifecycle. This operational playbook helps you meet your regulatory obligations and protect your firm from unnecessary risk. You can break the process down into several distinct stages.

Compliance policy (CP)

A compliance policy (CP) is your firm's formal policy for collecting and verifying investor information. This is the first and most fundamental step in your KYC process, but it matters throughout the fund lifecycle—from the subscription phase to ongoing monitoring and reporting suspicious transactions.

Customer due diligence (CDD)

The next step is to conduct customer due diligence (CDD), which involves:

Collecting documents;
Identifying the ultimate beneficiary (UBO) making an investment into your fund;
Screening the UBO against global watchlists, sanctions lists, and lists of politically exposed persons (PEPs) to ensure compliance with offering rules.

Enhanced due diligence (EDD) for high-risk investors

If your initial CDD flags an investor as potentially high-risk, you must perform enhanced due diligence (EDD). This more intensive investigation gives you a deeper understanding of the investor and their background. It's a necessary step to mitigate the higher risk they pose to your fund.

Continuous investor monitoring

AML compliance is not a one-time event that ends at closing. Continuous monitoring is the process of automatically and repeatedly screening all of your investors against watchlists that update daily and requesting updated documents when needed.

AML/KYC best practices

Taking a proactive approach to AML and KYC can streamline the compliance process and demonstrate your firm's commitment to operational excellence. This involves careful preparation—both internally and with investors.

How to prepare for KYC internally

Preparation begins long before an LP is ready to wire funds. A well-organized internal process prevents delays and protects your firm.

How to prepare investors for KYC

For LPs, the KYC process can feel opaque and repetitive. The more clarity fund managers provide upfront, the smoother the experience.

How to streamline the AML/KYC process

Traditionally, funds have relied on disconnected systems and disparate documents to manage AML and KYC—an inefficient approach that creates unnecessary operational risk. By switching from manual tasks to an integrated platform, funds can benefit from centralized data, streamlined checks, and automated workflows that can be adapted to different jurisdictions.


Operational task	Manual approach (the old way)	Integrated platform (the Carta way)
LP data collection	Chasing documents via email. Storing sensitive data in vulnerable systems.	Investors submit information securely via a dedicated LP Portal.
Risk screening	Manual, periodic checks against various watchlists. Status tracking in spreadsheets.	Automated, continuous screening with a real-time KYC dashboard.
Audit trail	Fragmented records across emails and local drives. Difficult to reconstruct.	A clean, auditable audit trail is automatically created and linked to each investor profile.
Fund operations	Compliance is siloed from fund accounting and reporting.	KYC data flows directly into the fund's general ledger, offering a single source of truth.

The purpose-built solution: Carta’s KYC closing tool

Regulatory requirements don't have to delay fund closings or strain LP relationships. By combining careful preparation with best-in-class technology like Carta, funds can turn compliance into a seamless part of the investor experience.

Frequently asked questions about AML and KYC

What are the pillars of an AML compliance program?

A compliant AML programme generally has four pillars:

A designated compliance officer
Written internal policies and controls
Ongoing employee training
Independent testing or auditing of the programme to confirm it is effective

What are the three stages of money laundering?

The three recognized stages are:

Placement: Illicit funds are first introduced into the financial system;
Layering: The funds are moved through complex transactions to obscure their origin;
Integration: The "cleaned" money is returned to the criminal from what appears to be a legitimate source.

These stages are not strictly sequential, and illicit funds can enter the chain at any point.

Do AML and KYC apply to special purpose vehicles?

Yes, AML and KYC requirements apply to special purpose vehicles (SPVs), such as those used by an investment syndicate, just as they do to traditional fund structures. You must vet each investor in an SPV to confirm the vehicle is not being used for illicit purposes, regardless of its specific structure or purpose.