Opening a basic bank account, especially for AIFs and for unregulated entities that are part of the AIF ecosystem, has been a more complex process in recent years than one might expect. In October 2022, the Luxembourg regulator, the CSSF, has provided a clarification regarding eligible entities for the opening of cash accounts in relation to Luxembourg AIFs. While this ensured compliance with AIFMD, it has caused a few headaches in the funds industry.
“The CSSF underlined that only central banks, EU authorised credit institutions as well as third country authorised banks may qualify as eligible entities to open cash accounts for these entities,” explained Steve David, Chief Executive Officer of FundBank (Europe) S.A.
Providing bank accounts fast for institutional asset managers for their regulated funds and unregulated structures is our bread and butter
“However opening cash accounts only – without providing other services such as fund administration and/or depository services – is frequently unviable from a commercial and potentially from an AML risk perspective for universal banks and for the major depository banks. And the situation is even worse for unregulated structures of the ecosystem. Meanwhile, PSFs offering depositary and other key services do often not have the strategic focus and the resources to acquire a banking licence,” he explained.
FundBank is stepping into this gap. They will offer institutional investors standard bank accounts (including forex, payments, etc.), custody accounts, prime brokerage, trade execution, escrow accounts and more. Thus, clients can have easy access to cash accounts, get provided with a real IBAN, which has a different risk profile than getting virtual IBANs, as a Report on virtual IBANs issued by the EBA in May 2024 has shown. In short, FundBank issues traditional bank accounts within the regulatory compliance framework, both for regulated AIFs and unregulated structures that are part of the AIF ecosystem.
Our core business is to offer a banking solution for the alternative investment fund ecosystem
Fast, secure and seamless onboarding
“Our core business is to offer a banking solution for the alternative investment fund ecosystem,” said Michael Klinkner, Chief Operating Officer. “Unlike other banks, serving funds is not an ancillary service, but 100% of our resources are fully dedicated to meeting the needs of regulated and unregulated entities,” he added. Fast onboarding is facilitated by this approach, paired with a high standard quality of service. FundBank promises to onboard clients within 10 business days after operational and compliance approval has been completed.
They are not seeking to compete with existing players, but are building partnerships across the Luxembourg ecosystem. “We are not offering depository, fund administration and the rest,” Klinkner explained. In the start-up phase, all activities will be conducted in Luxembourg, and over-time it will be complemented with a center of excellence for certain operational functions to support the expected growth, keeping client services and core functions in Luxembourg.
We are the highest regulated entity in Luxembourg as a credit institution
Highly regulated
“We are the highest regulated entity in Luxembourg as a credit institution,” noted Francesca Messini, Chief Risk Officer, highlighting the efforts FundBank, the CSSF and ECB have put into this project. “The relative speed at which the project was approved by the authorities points to their understanding of the need for these services” she added. The licencing process took a relatively short seven months, that is about half as long as it could have taken. This time included having to wait for the adaptation of some articles in the banking law in Luxembourg. “We went with high standards from the beginning of the approval process, and this helped to reduce discussions around procedures and policies,” Ms Messini noted. Yet she is convinced that this speedy outcome was facilitated by the authorities’ “pragmatic approach.” It also helped that she was able to draw on over 20 years fund and banking industry experience, including as a consulting partner with Deloitte.
FundBank’s solution regarding client funds is designed to give maximum comfort to both regulators and clients. This sees 95% of assets held off balance sheet through fiduciary agreements with top tier banks. The remaining 5% is placed overnight with the Luxembourg Central Bank. This method is aligned to the trust model used in the sister banks in the Cayman Islands and the US.
Client focused ethos
FundBank has grown from a family office established in the Cayman Islands in the 1970s. Mr David says that this is highly relevant, as their approach to cover-ustomer service is informed by the ethos of the wealth management industry. “We serve institutional investors in the way a family office treats its customers,” he said. “Not everybody understands the Luxembourg market in depth, and we strive to be responsive to client needs and requests.” Market reaction to the creation of FundBank has been a pleasant surprise to the team. “We knew that there was going to be demand for what we offer, but I don’t think anyone expected the level of interest we have had,” said Mr David. He pointed to more than 110 inquiries in the first five months of 2025, prospects that they are following actively. Several of these have become firm relationships ready for the go-live in August.
There has also been excitement from the labour market. FundBank has had little trouble hiring the right quantity and quality of experienced profiles, enabling them to build the multicultural, gender balanced workforce they require. In particular, they are looking to add more KYC/AML expertise to bring the workforce to 30 by the summer.
Quick and safe bank account opening for AIFs Illustration: Maison Moderne
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