Luxembourg Faces Call to Improve Anti-Money Laundering Efforts, FATF Report Reveals

Robust AML/CFT Framework, but Significant Challenges Remain

Luxembourg’s anti-money laundering and counter-terrorist financing (AML/CFT) framework has been praised for its robustness, but the country still faces significant challenges in tackling money laundering and terrorist financing risks. According to a report by the Financial Action Task Force (FATF), Luxembourg must intensify efforts to combat these threats, particularly in areas such as:

• Investigations and prosecutions
• Asset recovery
• Supervision of non-profit organizations

Risk-Based Supervision and Human Resources Constraints

As a major international financial hub, Luxembourg is exposed to high-risk products and services, including banking and investment sectors. The country’s financial supervisor, the Commission de Surveillance du Secteur Financier (CSSF), has prioritized risk-based supervision of these sectors through off-site monitoring and on-site inspections. However, the FATF report highlights that:

• Risk-based supervision of non-financial sectors, such as trust and company services, real estate, and notaries, is still in its early stages.
• Luxembourg’s Financial Intelligence Unit (CRF-FIU) produces high-quality financial intelligence products, but faces challenges in maintaining this level of production due to human resources constraints.

Improving Detection, Investigation, and Prosecution

To combat money laundering, Luxembourg should focus on:

• Improving the detection, investigation, and prosecution of complex money laundering cases, particularly in sectors exposed to significant risk such as real estate and professionals offering trust and company services.
• Developing and communicating strategies to stakeholders to take a more proactive approach to terrorist financing.

Gaps Identified by FATF

The report also highlights gaps that require further development, including:

• Improving domestic asset recovery
• Increasing international cooperation to combat money laundering and terrorist financing
• Implementing targeted financial sanctions

Opportunities for Improvement

Despite these challenges, Luxembourg’s authorities have demonstrated a good understanding of their AML/CFT risks and cooperate effectively with international partners. The country’s ability to freeze, seize, or confiscate assets involving crimes committed abroad has been praised. To address the gaps identified by FATF, Luxembourg must:

• Address the remaining gaps in its AML/CFT framework
• Ensure that it remains a leader in combating money laundering and terrorist financing

Conclusion

Luxembourg’s authorities have made progress in implementing targeted financial sanctions and cooperating with international partners. However, more needs to be done to address the gaps identified by FATF and ensure that Luxembourg remains a leader in combating money laundering and terrorist financing. By intensifying efforts to combat these threats, Luxembourg can maintain its position as a major international financial hub while also protecting its reputation and financial integrity.