Financial Crime World

Risk-Based Approach to Financial Crime in Luxembourg Recommended by FATF

The Financial Action Task Force (FATF) has commended Luxembourg for its solid anti-money laundering and counter-terrorist financing framework, but has identified areas of improvement to maintain the country’s status as a robust international financial hub.

Key Findings

  • Luxembourg’s main money laundering threat comes from foreign predicate offenses such as tax crimes, corruption, and fraud.
  • The banking, investment, and trust and company service sectors are among the most vulnerable to money laundering and terrorist financing.
  • Risk-based supervision of non-financial sectors such as real estate, notaries, and professionals offering trust and company services is still in its early stages.

Recommendations

  • Focus more on sectors exposed to significant money laundering risk, such as real estate and professionals from the non-financial sector offering trust and company services.
  • Improve detection, investigation, and prosecution of complex money laundering cases.
  • Take a risk-based approach to oversight of the non-profit organizations sector.
  • Enhance domestic asset recovery measures.

Challenges

  • Risk-based supervision of non-financial sectors requires further work.
  • Luxembourg’s Financial Intelligence Unit (CRF-FIU) needs to ensure it can continue to produce high-quality financial intelligence products given its level of human resources.
  • There are gaps in the regime for targeted financial sanctions for terrorist financing.

Best Practices

  • Proactively identify and investigate terrorist financing activity alongside terrorism-related investigations.
  • Make effective use of tools to freeze, seize, or confiscate assets involving crimes committed abroad when responding to requests from foreign counterparts.

Conclusion

While Luxembourg has made significant progress in its anti-money laundering and counter-terrorist financing efforts, there is still room for improvement. By adopting a more risk-based approach to financial crime, the country can maintain its status as a robust international financial hub and continue to meet global standards for financial transparency and integrity.