Luxembourg Investment Firms Must Ensure Effective Transaction Monitoring and Screening
In an effort to combat money laundering and terrorist financing, Luxembourg investment firms are required to implement effective transaction monitoring and screening systems. However, ensuring the efficiency and effectiveness of these systems can be a complex task.
Thorough Data Analysis Required
According to recent regulations, investment firms must perform thorough analysis of data to detect risk factor situations that trigger red flags. Additionally, they must conduct data quality assessments to ensure:
- Completeness
- Format
- Consistency
- Integrity of the data gathered in their transaction monitoring tools.
Optimization Strategies
To optimize their systems, firms must:
- Assess the effectiveness of screening rules and “fuzzy logic” settings
- Fine-tune scenarios and settings
- Evaluate current rules and thresholds
- Perform data quality assessments and processing
- Create a rulebook to evaluate current rules and thresholds
Post-Alert Management
Once alerts are triggered, firms must:
- Manage the backlog through automation and analysis
- Optimize SAR process through enabling synergies and standardization for SAR management and submission
- Execute a managed solution
- Review alerts to handle or remediate backlogs
AML/CTF Risk Scoring of Assets
In Luxembourg, investment fund managers and funds are required to assign an AML/CTF risk score to their assets. This score must be kept up-to-date and the methodology used must respect guidelines provided by:
- Financial Action Task Force
- European Banking Authority
- Luxembourg regulators
Business Wide Risk Assessment
Luxembourg professionals subject to AML/CTF laws and regulations are required to understand and assess the inherent and residual risks to their entity on an annual basis or update it when significant events occur. This involves:
- Collecting data
- Developing a methodology for assessing inherent and residual risks
- Calculating and reporting these risks
PwC Solution
To help investment firms navigate these complex requirements, PwC has developed digital solutions that ensure compliance, efficiency, and effectiveness. Our team of experts can assist with:
- Developing a risk-based approach to AML/CTF
- Collecting and inserting required data accurately and completely
- Providing continuous access to the asset risk assessment via our platform
- Tailoring output to specific reporting requirements
By leveraging PwC’s digital solutions and expert guidance, investment firms can ensure effective transaction monitoring and screening, as well as accurate AML/CTF risk scoring of assets and business-wide risk assessments.