Luxembourg Adopts Risk-Based Approach to Anti-Money Laundering
Strengthening Fight Against Money Laundering and Terrorism Financing
Luxembourg has introduced a risk-based approach to anti-money laundering (AML) regulations, aimed at strengthening its fight against money laundering and terrorism financing. The new regulation came into effect on August 14, requiring financial institutions to adopt a more nuanced approach to AML compliance.
Key Requirements
Under the new rules, financial institutions must:
- Establish a comprehensive AML program that includes:
- Measures to identify and verify customers
- Monitoring of transactions for suspicious activity
- Reporting of potential money laundering or terrorist financing activities to relevant authorities
- Maintain accurate records of their AML efforts
- Conduct regular reviews to ensure compliance
Risk-Based Approach
The risk-based approach is designed to help financial institutions focus their AML efforts on areas where they are most likely to encounter risks, rather than applying a one-size-fits-all approach to all customers and transactions. This includes:
- Identifying high-risk customers or transactions, such as those involving cash-intensive businesses or individuals with a history of criminal activity
Outsourcing AML Compliance
The new regulation emphasizes the importance of outsourcing AML compliance to third-party service providers, but requires financial institutions to ensure that these providers are subject to:
- Rigorous due diligence
- Ongoing monitoring
Additionally, the regulation mandates regular reporting to the Luxembourg Financial Intelligence Unit (FIU) on suspicious transactions and activities.
Statement from the Luxembourg Ministry of Finance
“The risk-based approach is a key component of our efforts to combat money laundering and terrorism financing in Luxembourg. By targeting high-risk areas and working closely with financial institutions, we can ensure that our financial system remains secure and transparent.”
Compliance Deadline
Financial institutions operating in Luxembourg must comply with the new regulation by August 14, 2023. Failure to do so may result in penalties, fines, or even license revocation.
Full Text of the Regulation
The full text of the new regulation can be found on the website of the Luxembourg Financial Intelligence Unit (FIU).