Dublin / New York, November 30, 2023
The regulatory landscape for private equity is becoming increasingly complex with evolving regulatory demands across various domains, such as:
- ESG Regulation: ESG disclosures, once considered a back-office function, have become central to investor relations and business strategy, especially under the European Commission’s Sustainable Finance Disclosure Regulation (SFDR). The need for clear, comprehensive disclosures not only increases the complexity of compliance but also demands more qualified personnel or third-party assistance.
- EU’s Digital Operational Resilience Act (DORA): DORA aims to minimize systemic risks arising from increased outsourcing practices and ICT third-party concentration. It sets strict requirements for operational resilience, cybersecurity, and incident management. Asset management firms, including PE firms, are required to invest significantly in operational risk, covering aspects like contract standards with ICT third-parties and cybersecurity testing.
- AML Regulations: Anti-Money Laundering (AML) regulations are becoming increasingly stringent globally, with Europe leading the charge. These regulations mandate enhanced due diligence, especially for politically exposed persons, and require rigorous verification of client and beneficial owner identities. The changes necessitate global PE firms to overhaul their AML policies and procedures, adapting to more robust customer due diligence requirements.
- AIFMD II: AIFMD II introduces amendments in areas like delegation, substance requirements, investor disclosure/reporting, depositary rules, and third-country distribution. These changes have made it imperative for PE firms to reassess existing delegation arrangements, bolster comprehensive reporting, and make crucial adjustments in the selection and management of depositaries.
- Technology Challenges:
- Compliance and Data Processing: The technological demands for data processing and compliance updates are significant. PE managers face decisions about investing in their technology or outsourcing to service providers.
- Operational Strain: Keeping up with cybersecurity, data protection, AML, and KYC checks is a constant challenge, requiring either in-house capabilities or reliance on third-party providers.
- Staffing Challenges: Finding and retaining qualified staff for back-office functions, especially in jurisdictions like Luxembourg and Ireland, is increasingly difficult.
To address these challenges, PE firms are turning to fund administrators like Centaur. With their dedicated teams and strategies, Centaur offers a robust compliance framework that not only tracks regulatory activities but also proactively protects clients against financial and reputational damage. Their investment in technology platforms ensures automated, transparent, and secure reporting, allowing PE managers to benefit from these systems without the associated costs and time of in-house implementation.
With the upcoming implementation of AIFMD II and continued evolution in the regulatory space, readiness for future changes is crucial. Centaur is committed to assisting fund managers in navigating these complexities, ensuring compliance and operational resilience.
Karen Malone, Global CEO at Centaur, a Waystone Group Company, says, 'In the face of ever-evolving regulations, our goal is to simplify the compliance journey for PE firms. Our dedicated teams and advanced technology are key in helping our clients stay ahead in this dynamic regulatory environment.”
She continues: “Outsourcing to fund administrators like Centaur allows PE firms to minimize regulatory risks, reduce administrative costs, and gain a competitive edge. Moreover, our expertise in navigating complex regulatory landscapes transforms compliance from a challenge into an opportunity for strategic growth and operational excellence.”