As global financial hub known for its robust banking and investment industry, Luxembourg is awaiting an upcoming discussion at the Financial Action Task Force (FATF) on its anti-money laundering (AML) measures. The FATF, the international body responsible for combating money laundering and terrorist financing, will discuss the findings of its latest mutual evaluation assessment of the grand duchy next week in Paris.
Luxembourg was subject to an onsite inspection by an FATF delegation last November. The delegation’s findings are on the agenda for the task force’s next plenary meeting, scheduled for the week starting Monday 19 June in Paris.
As a leading financial centre in Europe Luxembourg has been closely monitoring its AML framework and strives to maintain its reputation for strong financial governance. A similar country The FATF report will shed light on the effectiveness of Luxembourg’s AML measures and provide insights into areas that may require further improvement.
A similar report in 2009 found a number of shortcomings, which led to Luxembourg being ‘grey-listed’ until 2013, being ranked among countries with strategic deficiencies in their anti-money laundering and counter-terrorism financing regimes.
CSSF stepped up AML supervision
While the new FATF report is yet to be revealed, it is expected that it will show that Luxembourg has made progress in enhancing its AML regime. The country has implemented various measures over the years to combat money laundering, including strengthening customer due diligence procedures, enhancing cooperation among financial institutions, and improving regulatory oversight.
Luxembourg’s national supervisor CSSF also has stepped up its on-site inspections for anti-money laundering and has issued a number of fines to firms whose governance was not up to date. Its annual AML survey last year found a “satisfactory” understanding of AML risks among market participants in general.
In the months before the FATF visit, CSSF reprimanded a number of financial institutions for not having proper AML procedures in place. Among them, Banque J. Safra Sarasin (Luxembourg) S.A, Maitland Luxembourg SA and BLI - Banque de Luxembourg Investments.
In its 2022 annual report, CSSF said money laundering is an issue in the Luxembourg market for collective investments because of its size, the cross-border nature of the distribution of investment funds, and the international investments done by investment funds.
‘Occasionally abused’
“The collective investment sector, named as such because it consists of several parties pooling money together in investment funds, can be occasionally abused by money launderers,” said Guilhem Ros, head of the CSSF’s UCI AML department, in the annual report. “By investing in investment funds for laundering purposes, criminals may even increase the return on monies which they have gained illegally.”
The outcome of the coming FATF report may have implications for Luxembourg’s financial institutions as it could influence regulatory requirements and shape future AML initiatives. Moreover, it will serve as a benchmark against which Luxembourg can evaluate its efforts in combating money laundering and further enhance its financial governance practices.
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