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Luxembourg Must Step Up Fight Against Financial Crime, Says FATF
International Financial Hub Faces Key Challenges in Combating Money Laundering and Terrorist Financing
Luxembourg, September 27, 2023 - The Grand Duchy of Luxembourg has a solid framework for combating money laundering and terrorist financing, but it still needs to address several key areas of concern, according to the Financial Action Task Force (FATF).
Key Strengths and Weaknesses in Luxembourg’s System
Despite its strong anti-money laundering and counter-terrorist financing regime, Luxembourg’s authorities have been urged to focus more on investigating and prosecuting money laundering cases, recovering assets and supervising non-profit organizations and certain non-financial sectors.
Some key strengths of Luxembourg’s system include:
- Domestic co-operation and coordination: Authorities have timely access to beneficial ownership information and cooperate extensively with international counterparts.
- High-quality financial intelligence products: The Financial Intelligence Unit (FIU) produces high-quality financial intelligence products, but faces challenges due to limited human resources and a complex role.
However, there are several areas of concern that need to be addressed:
- Risk-based supervision of non-financial sectors: Risk-based supervision of non-financial sectors such as trust and company services, real estate and notaries is still in its early stages.
- Detection, investigation, and prosecution of complex money laundering cases: Authorities should improve the detection, investigation, and prosecution of more complex money laundering cases.
FATF Recommendations for Luxembourg
To address these concerns, the FATF recommends that:
- Luxembourg focus on sectors exposed to significant money laundering risk, such as real estate and professionals from the non-financial sector offering trust and company services.
- Authorities improve the detection, investigation, and prosecution of more complex money laundering cases.
- Develop and communicate understanding of terrorist financing risks: Luxembourg should develop and communicate its understanding of terrorist financing risks to public and private sector stakeholders, particularly given its status as an international financial centre.
Challenges in Domestic Asset Recovery
Luxembourg also faces challenges in domestic asset recovery but makes effective use of tools to freeze, seize or confiscate assets involving crimes committed abroad. While the country implements targeted financial sanctions for terrorist financing within one day, it needs to further develop its regime to demonstrate effectiveness.
Conclusion
Overall, while Luxembourg has made significant progress in combating money laundering and terrorist financing, it must continue to address these key areas of concern to maintain a robust and effective system.