The Financial Sector Supervisory Commission (CSSF) announced in a  that it had imposed an administrative fine of €162,500 on the specialised professional of the financial sector Intertrust (Luxembourg) S.à r.l. The administrative fine was imposed for “non-compliance with depositary obligations” under the Alternative Investment Fund Managers Law and is the result of an onsite inspection carried out by the CSSF between August 2021 and February 2022 covering the depositary obligations.

During the inspection, the CSSF identified breaches related to the depositary function exercised by Intertrust. In particular, the “general organisation of the depositary function”--meaning “administrative and accounting organisation as well as adequate internal control procedures”--was not appropriate. The internal control system was not robust, tasks prepared by external staff were not subject to enough control, sufficient resources weren’t allocated to the depositary activities and information provided during the inspection was not complete and reliable.

“Safekeeping duties for other assets” weren’t aligned with the AIFM law either, noted the CSSF. Intertrust was “unable to demonstrate that it collected sufficient and reliable evidence to verify the AIFs’ ownership of the assets.” The role of the depositary is “key” in that context, said the CSSF. In addition, Intertrust was unable to provide an inventory of the assets for some alternative investment funds, and “had not performed any review of the “AIFM’s process in place in relation to AIFs asset registration and any reconciliation of its own record against the records of the AIFM.”

The “safekeeping of financial assets to be held in custody” was also not in accordance with the law; the execution of oversight duties were not compliant either; and the cash flow monitoring process was not executed in accordance with the requirements of the law.

The CSSF noted that the sanction took into account “the number and degree of severity of the breaches existing at the time of the onsite inspection,” as well as the fact that Intertrust “has acknowledged the findings and observations and has provided a general action plan and initiated corrective measures during and after the onsite inspection in order to remedy the breaches found.”

Delano contacted Intertrust for comment. In a statement, an Intertrust Group spokesperson said: “We take legal and regulatory compliance extremely seriously. Concrete steps have been taken since these shortcomings were identified to strengthen the firm’s depositary function--including redesigning its structure, revamping the corresponding control framework, deploying a project for the implementation of a dedicated depositary platform, and setting up a Depositary Committee with oversight of depositary duties. We continue to fully cooperate with the CSSF.”

Luxembourg’s financial regulator in March 2023  on Intertrust for “non-compliance with several professional obligations.”

Updated 21 March, 18:45 with comment from Intertrust.