Investment funds may be used by persons or entities for ML/TF purposes:

a) Retail funds are often distributed on a non-face-to-face basis; access to such funds is often easy and relatively quick to achieve, and holdings in such funds can be transferred between different parties.

b) Alterative investment funds, such as hedge funds, real estate and private equity funds, tend to have a smaller number of investors, which can be private individuals as well as institutional investors (pension funds, funds of funds). Such funds that are designed for a limited number of high-net-worth individuals, or for family offices, can have an inherently higher risk of abuse for ML/TF purposes than retail funds, since investors are more likely to be in a position to exercise control over the fund assets. If investors exercise control over the assets, such funds are personal asset-holding vehicles, which are mentioned as a factor indicating potentially higher risk in Annex III to Directive (EU) 2015/849.

c) Notwithstanding the often medium- to long-term nature of the investment, which can contribute to limiting the attractiveness of these products for money laundering purposes, they may still appeal to money launderers on the basis of their ability to generate growth and income.