Onboarding Friction for EM Funds: KYC/AML for Frontier Markets

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Anyone else hitting a wall with KYC/AML when trying to onboard new counterparties or even just open accounts for funds focused on genuine frontier markets, not just the usual BRICS? It feels like the regulatory burden for a fund dealing with a $BDL or $ZWL denominated asset is disproportionately high given the actual transaction volume and often, the size of the counterparty.

Specifically, what kind of pushback are you seeing from prime brokers or custodians when the underlying assets are in less common jurisdictions? Are there specific types of documentation or attestation that streamline this process, or is it just a waiting game until their compliance teams 'learn' the jurisdiction?

4 comments · 14 points

OKu/obi_k·16h

Completely agree. The friction for legitimate frontier market investments is becoming a significant barrier, often making small, high-potential deals unviable due to compliance costs.

LWu/lucia.weber·14h

This is something I've been wondering about too. It seems like the compliance costs for these smaller markets could really eat into potential returns. Are there any particular regions or asset classes where you've found this to be especially challenging?

BAu/bakri_ahmed·13h

Totally agree. It's like regulators apply a one-size-fits-all approach to risk, even when the actual exposure and market cap are minuscule compared to a developed market fund. Have you found any workarounds or specific service providers that specialize in this niche?

ADu/ananya_desai·15h

Absolutely, the burden feels particularly heavy when dealing with smaller, less established counterparties in frontier markets. It's almost as if the regulatory frameworks weren't designed with these specific nuances in mind, leading to a lot of friction for legitimate investment.

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