Less than a week before announcing the sale of its asset management services arm, Luxembourg’s troubled investment firm Fuchs & Associés Finance - still in liquidation - was fined €785,000 by the Grand Duchy’s financial supervisor CSSF under laws on the fight against money laundering and terrorist financing.
CSSF stated that its findings pointed to tax fraud and money laundering. «Although there were indications that generated serious suspicions of money laundering in one file, the entity had not reported them to the Financial Intelligence Unit,» CSSF said in an elaborate five-page statement issued on Tuesday.
The firm did not gather sufficient information on some of its clients to «reasonably exclude the risk of a primary tax offence» even when their files «contained several elements of tax risk,» CSSF noted.
The new fine, issued on 26 September 2023, comes on top of two earlier ones totalling €1.55 million that CSSF had issued a year earlier for compliance and IT governance failures. Luxembourg’s Fuchs saga is seen as an example of how the CSSF, as a regulator, in recent years has stepped up its efforts to more closely scrutinise, and penalise, investment firms that do not comply with an increasingly stringent legal and regulatory framework.
‘Deficient at several levels‘
CSSF said Fuchs & Associés had breached its professional obligations concerning anti-money laundering (AML) laws and regulations. During an on-site inspection, the supervisor found numerous «breaches and ongoing violations». CSSF reiterated that its findings pointed to tax fraud and money laundering.
«Onboarding new business relationships was deficient at several levels,» said CSSF, adding that no due diligence measures were put in place for a certain number of clients. An analysis of Know-Your-Customer (KYC) files showed that Fuchs & Associés «had been unable to determine whether some of those clients were acting on their own behalf or for another person» and that in some cases, the firm «even had doubts about the true identity of the beneficial owners.»
Fuchs & Associés, whose founder Jean Fuchs previously served as a CSSF board member, was placed in liquidation in July last year when CSSF revoked the firm’s authorisation to operate as an investment services provider. With permission from the Luxembourg liquidators, Fuchs’ asset management unit in September 2023 was sold to Amsterdam-based Trustmoore, a global boutique corporate services company, and Timothy Fuchs, the son of the firm’s founder, for an undisclosed amount.
Funds Avenue
The partnership was subsequently renamed Funds Avenue, which administrates approximately €20 billion in assets, a spokesman said at the time. Research by Investment Officer learned that the firm serves as Alternative Investment Fund Manager, or AIFM for nearly 50 reserved alternative investment funds in Luxembourg, investing in a range of activities including animated movies, German real estate, trade finance, Polish mortgages, and pharmaceutical services.
The fine CSSF issued in September was not Fuchs’ first. In September 2022, CSSF said it had imposed two fines totalling €1.55 million due to internal governance and compliance failures. People familiar with the case have told Investment Officer that CSSF at the time pushed Fuchs to split into a good and a bad part of the company, an approach resembling the liquidation of troubled banks subject to EU regulation. The good part was subsequently sold, and the bad part was left to go bankrupt.
Fine came few days before Trustmoore deal
CSSF imposed the additional fine of €785,000 on 21 September, only a few days before Trustmoore announced its partnership with Fuchs Asset Management. Fuchs & Associés “had not attempted to clear its doubts,” said CSSF, which also “identified a lack of information and a non-corroboration of information on the source of funds.”
Fuchs & Associés was created as a Luxembourg investment firm by Jean Fuchs in 2000. A 68-year-old French native and avid hunter who barely speaks to the press, Jean Fuchs prided himself as a staunch opponent of regulation in the financial sector. «The banking world is full of cheats,” he said in a 2016 interview with Luxembourg business website Paperjam. “The sector is over-regulated. It is not only excessive but also unnecessary,» he added. «You don’t take away the risk factor, but you instil in people’s heads that the banking world is full of cheats.»
Founder served as CSSF director for a decade
Between 2000 and 2010 Jean Fuchs served as a member of the board of directors at CSSF, according to the supervisor’s annual reports. Although he no longer served in this role from 2011, his firm’s website continued to describe him as still being active in that capacity until 2022. The current official status of Fuchs & Associés is that it is still in liquidation. Its most recent filing to the Luxembourg Business Register dates from the end of October and shows that a second administrator was appointed on 5 October.