AFM update on compliance and internal audit functions at fund managers

On 23 July 2026, the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten, AFM) issued a news update on areas of attention for compliance and internal audit functions at Alternative Investment Fund Managers (AIFMs) and managers of Undertakings in Collective Investment in Transferable Securities (UCITS Managers)(collectively referred to as Fund Managers).

As follows from a survey among Fund Managers, the AFM finds that, while many Fund Managers have their compliance and audit functions well organised, there is room for improvement. The AFM identifies three areas of attention:

• Compliance documentation: Compliance documentation is sometimes out-of-date, incomplete or too general. Furthermore, planning, monitoring and reporting are not always properly aligned. As a result, there is a risk that shortcomings will not be identified or followed up in a timely manner. The AFM expects Fund Managers to update their documentation regularly and ensure it is tailored to the risks specific to their own organisation.

• Outsourcing: Many Fund Managers use external parties to carry out compliance or internal audit work. The AFM observes that organisations sometimes rely heavily on external parties, which can obscure risks and reduce the effectiveness of the control function. Fund Managers must maintain sufficient knowledge and involvement within their own organisation and actively oversee the execution of outsourced tasks.

• Justification of decisions: The AFM observes that the justification of decisions, such as the application of the principle of proportionality by, for example, combining roles or reorganizing the internal audit function, is often lacking or too limited. Fund Managers must be able to clearly explain why a chosen structure is appropriate to the nature, scale and complexity of their organisation. The AFM also expects a clear separation between operational activities and control functions.

The AFM expects Fund Managers to strengthen their governance and internal control. The AFM will continue to include the topics and findings from the report in its supervision and expects Fund Managers to use the outcomes of the investigation to further improve their compliance and internal audit function.

The news update is available here.