4. Organisational framework and structure

The management body of an issuer of ARTs should ensure a suitable and transparent organisational and operational structure for that issuer of ARTs and should have a written description of it. The structure should promote and demonstrate the effective and prudent management of the issuer of ARTs and the group, where applicable.

The management body should ensure that the internal control functions have the appropriate financial and human resources as well as powers to effectively perform their role. As a minimum, the compliance function should operate independently, including that there is an appropriate segregation of duties. The reporting lines and the allocation of responsibilities should be clear, well-defined, coherent, enforceable and duly documented. The documentation should be updated as appropriate.

The structure of the issuer of ARTs should not impede the ability of the management body to oversee and effectively manage its risks or the group, where applicable, is exposed to or the ability of the competent authority to effectively supervise the issuer of ARTs.

The management body should assess whether and how material changes to the group’s structure where applicable (e.g. setting up of new subsidiaries, mergers and acquisitions, selling or winding-up parts of the group, or external developments) impact on the soundness of the ART issuer organisational framework. Where weaknesses are identified, the management body should make any necessary adjustments swiftly. 4.2 Know your structure

The management body should fully know and understand the legal, organisational and operational structure of the issuer of ARTs (‘know your structure’) and ensure that it is in line with its approved business and risk strategy and risk appetite and covered by its risk management framework.

The management body should ensure that the structure of an issuer of ARTs and, where applicable, the structures within a group are clear, efficient and transparent to the staff, shareholders and other stakeholders and to the competent authority.

The management body should guide the issuer of ARTs ’ structure, its evolution and its limitations and should ensure that the structure is justified and efficient and does not involve undue or inappropriate complexity.

When setting up such structures, the management body should understand them and their purpose and the particular risks associated with them and ensure that the internal control functions are appropriately involved. Such structures should be approved and maintained only when their purpose has been clearly defined and understood, and when the management body is satisfied that all material risks, including reputational risks, have been identified, that all risks can be managed effectively and appropriately reported, and that effective oversight has been ensured. The more complex the organisational and operational structure, and the greater the risks, the more intensive the oversight of the structure should be.

Issuer of ARTs should take into account in their decision-making the results of a risk assessment performed to identify whether such structures could be used for a purpose connected with ML/TF or other financial crime to ensure that the issuer or the sector is not exposed to serious risk of ML/TF. To this end, issuers of ARTs should take into account as a minimum:

• a. the extent to which the jurisdiction, in which the structure will be set up complies effectively with EU and international standards on tax transparency, anti-money laundering and countering the financing of terrorism;
• b. the extent to which the structure serves an obvious economic and lawful purpose;
• c. the extent to which the structure could be used to hide the identity of the ultimate beneficial owner;
• d. the extent to which the reason that leads to the possible setting-up of a structure gives rise to concern;
• e. whether the structure might impede appropriate oversight by the ART issuer ’s management body or the issuer ’s ability to manage the related risk; and
• f. whether the structure poses obstacles to effective supervision by competent au-thorities.

In any case issuers of ARTs should not set up opaque structures or unnecessary complex structures that have no clear economic rational or legal purpose, or structures that could raise concerns that these might be created for a purpose connected with financial crime.

Issuers of ART should document their decisions and be able to justify their decisions to competent authorities.

These structures and activities, including their compliance with legislation and professional standards, should be subject to a regular review. Where an internal audit function is established, it should perform the review on a risk-based approach.