Luxembourg's measures to combat money laundering and terrorist financing
aris, 27 September 2023 - The Grand-Duchy of Luxembourg (“Luxembourg”) has a solid anti-money laundering and counter-terrorist financing (AML/CFT) framework and a good understanding of its money laundering and terrorist financing risks. Authorities make good use of financial intelligence and co-operate effectively with international counterparts. However, Luxembourg needs to focus more on money laundering investigations and prosecutions, asset recovery and supervision of non-profit organisations and some non-financial sectors, according to FATF’s assessment of the country’s measures to tackle money laundering and terrorist financing.
Luxembourg is a large international financial hub, with significant cross-border financial flows, international clientele and high-risk products and services, particularly in the banking and investment sectors. The country has identified foreign predicate offences as its main money laundering threat, including tax crimes, corruption and fraud.
Luxembourg has large and diverse financial and non-financial sectors. The banking, investment and trust and company service sectors are among the most vulnerable to money laundering and terrorist financing. Luxembourg’s financial supervisor (Commission de Surveillance du Secteur Financier, CSSF) has focused its priorities and human resources on the banking and investment sectors and is using a multipronged risk-based approach of off-site supervision and monitoring through on-site inspections. However, risk-based supervision of the non-financial sectors, such as trust and company services, real estate and notaries, is in the early stages and further work needs to be done.
The key strength of the Luxembourg system is the robust domestic co-operation and co-ordination. Authorities also have timely access to beneficial ownership information and co-operate extensively and constructively with international counterparts.
Luxembourg’s Financial Intelligence Unit, CRF-FIU, produces and disseminates a wide range of high-quality financial intelligence products but needs to ensure that it can continue to do so given its level of human resources and increasingly complex role.
Luxembourg should focus more on sectors that are exposed to significant money laundering risk such as real estate and professionals from the non-financial sector offering trust and company services. Given the country’s risk profile, authorities should also improve the detection, investigation, and prosecution of more complex money laundering cases. Although some Luxembourg authorities demonstrate a good understanding of terrorist financing risk, the FATF mutual evaluation highlights that the country should further develop and communicate to public and private sector stakeholders how the country’s status as an international financial centre can be exploited for larger scale terrorist financing. Luxembourg should take a risk-based approach to its oversight of the non-profit organisations sector, including through outreach to increase this sector’s poor understanding of terrorist financing risk.
Luxembourg needs to focus more on domestic asset recovery. However, when responding to requests by foreign counterparts it makes effective use of tools to freeze, seize or confiscate assets involving crimes committed abroad. While the country generally implements targeted financial sanctions for terrorist financing within one day, measures to remedy gaps in the targeted financial sanctions regime, several of which were only recently put into place, require further development to demonstrate whether they are effective.
Luxembourg proactively identifies and investigates terrorist financing activity alongside terrorism related investigations but, due to mitigating measures and the country’s risk profile, these investigations have not yet led to prosecutions or convictions.
