Financial Crime World

Risk Assessment Re-Evaluation Needed Amidst New AML Regulations

The financial sector is undergoing a significant overhaul of its anti-money laundering (AML) regulations, prompting professionals to re-evaluate their risk assessment strategies.

Changes in AML Regulations

According to the new Grand-Ducal Regulation of 1 February 2010, as amended by Grand-ducal Regulation of 14 August 2020, and the New Regulation, financial institutions must now identify:

  • High-risk jurisdictions
  • Individuals, entities, and groups subject to restrictive measures in financial matters
  • Ensure that funds are not made available to these groups

Additionally, professionals must update their internal AML systems to detect persons, entities, or groups involved in transactions or business relationships subject to restrictive measures without delay.

Requirements for Financial Institutions

Financial institutions must also:

  • Identify Politically Exposed Persons (PEPs) at least every six months during the business relationship
  • Update internal AML systems to detect persons, entities, or groups involved in transactions or business relationships subject to restrictive measures without delay
  • Put in place a process for transmitting original supporting evidence upon request and without delay

Outsourcing Arrangements and Agency Relationships

The regulation emphasizes the importance of outsourcing arrangements and agency relationships, highlighting the need for:

  • Detailed clauses specifying roles and responsibilities
  • Conditions relating to information transmission
  • A process for transmitting original supporting evidence upon request and without delay

Non-Face-to-Face Business Relationships

Non-face-to-face business relationships require additional measures, including:

  • Electronic identification means or relevant trust services
  • Alternative measures, such as establishing the customer’s identity through additional documents or information, if such safeguards are not available

Internal Management

The regulation also highlights the importance of internal management, introducing new roles and responsibilities for compliance officers and persons responsible for AML/CFT procedures.

Key Takeaways

  • Financial institutions must identify high-risk jurisdictions, individuals, entities, and groups subject to restrictive measures in financial matters.
  • AML systems must be updated to detect persons, entities, or groups involved in transactions or business relationships subject to restrictive measures without delay.
  • Politically exposed persons (PEPs) must be identified at least every six months during the business relationship.
  • Outsourcing arrangements and agency relationships require detailed clauses specifying roles and responsibilities.
  • Non-face-to-face business relationships require additional measures, including electronic identification means or relevant trust services.
  • Internal management is critical, with new roles and responsibilities for compliance officers and persons responsible for AML/CFT procedures.

The full text of the regulation can be found on the CSSF website, along with links to relevant FAQs and guidelines.