Financial Crime World

Ensuring Compliance with Anti-Money Laundering and Counter-Terrorist Financing Regulations for Securitization Vehicles

A Risk-Based Approach to Due Diligence and Oversight in Investment Activities

In light of the regulatory requirements imposed by the Commission de Surveillance du Secteur Financier (CSSF) on securitization vehicles (SVs), companies engaged in investment activities must implement a robust anti-money laundering (AML) and counter-terrorist financing (CTF) framework to mitigate the risk of money laundering and terrorist financing.

Key Obligations

To ensure compliance with AML/CTF regulations, companies must fulfill the following key obligations:

  • Risk Appetite Statement: Establish a written statement outlining the company’s willingness to take on ML/TF risks, which will guide the due diligence and oversight process.
  • ML/TF Risk Analysis: Conduct regular risk analysis to identify, assess, and understand ML/TF risks specific to each asset type, including securities, structured products, and derivatives.
  • Targeted Financial Sanctions/Proliferation Financing (TFS/ PF) Controls: Implement controls to ensure compliance with TFS/PF requirements, including screening of transactions and parties connected to them.
  • Record-Keeping: Maintain accurate records of AML/CFT due diligence controls, including documentation of the risk assessment process and results.
  • Reporting: Report any suspicious activity or transaction to the relevant authorities in a timely manner.

AML Due Diligence Requirements

To effectively mitigate ML/TF risks, companies must implement the following AML due diligence requirements:

  • Onboarding: Conduct adequate checks on SVs at the time of onboarding, ensuring that the purpose and nature of transactions are well understood.
  • UBO Identification: Identify ultimate beneficial owners (UBOs) on a case-by-case basis, considering indicators such as control over the SV through other means.
  • Customer Due Diligence Procedures: Implement procedures to ensure understanding of the expected activity, beneficial ownership structures, and source of wealth and funds.

Compliance Officer Role

The compliance officer plays a crucial role in ensuring AML/CTF compliance:

  • Appointment: Appoint a compliance officer responsible for ensuring compliance with AML/CTF regulations and circulars.
  • Internal Controls and Governance: Establish internal controls and governance structures to ensure ML/TF risks are identified and mitigated.
  • Training and Awareness: Provide training and awareness programs to staff and directors on the importance of AML/CTF compliance.

EY Services

EY offers a range of services to help companies comply with AML/CTF regulations:

  • AML Framework Review or Gap Analysis: Conduct a review of the existing AML framework or perform a gap analysis to identify areas for improvement.
  • AML/CTF Remediation Support: Provide support in remediating AML/CTF deficiencies, including Know Your Customer/Know Your Transaction/Know Your Assets/Know Your Distributor/Know Your Investor procedures.
  • Staff and Director Training: Offer training programs on AML/CTF regulations and best practices.
  • Review of Specific Relationships: Conduct reviews of specific relationships, such as clients, distributors, investors, and other parties connected to the SV.
  • Onboarding Assistance and Due Diligence Services: Provide assistance with onboarding SVs and conducting due diligence on assets.

By implementing a robust AML/CTF framework and ensuring compliance with regulatory requirements, companies can mitigate the risk of ML/TF and maintain a strong reputation in the financial sector.