Financial Crime World

Luxembourg’s Fight Against Money Laundering and Terrorism Financing: A Review

In a recent assessment, Luxembourg’s efforts in combating money laundering (ML) and terrorism financing (TF) were evaluated by the Financial Action Task Force (FATF). The country was found to have made significant progress in implementing anti-money laundering and counter-terrorism financing measures.

Main Threats Identified

According to the assessment, foreign predicate offenses such as:

  • Fraud
  • Forgery
  • Tax crimes
  • Corruption
  • Drug trafficking

pose a significant ML threat to Luxembourg. The country’s position as an international financial hub makes it vulnerable to these threats. However, the threat level for domestically generated proceeds being laundered through Luxembourg is considered low due to the country’s low crime rate.

Compliance and Effectiveness

Luxembourg was found to have strong technical compliance with the FATF Standards. While some initiatives have shown results, others are still in their early stages or require more time to become operational. The country’s efforts to:

  • Improve DNFBP supervision
  • Reform asset management
  • Change its anti-money laundering law

have started to show positive results.

Risk Assessment and Coordination

Luxembourg has taken steps to increase its national ML/TF risk understanding through a range of initiatives, including the production of national risk assessments (NRAs). The country’s May 2022 TF Vertical Risk Assessment employed a sound methodology and provided a good basis for understanding ML risks. However, some authorities’ overall TF risk understanding is less well-developed.

Policy and Activities

The risk assessments have informed Luxembourg’s AML/CTF policies and activities, leading to multiple national and agency-level action plans over the past four years. These actions include:

  • Further harmonization of supervision
  • Access to beneficial ownership information registers
  • Establishment of an asset recovery office

Key Strengths and Challenges

Luxembourg’s key strength is its strong domestic coordination and cooperation on AML/CTF issues at both policy and operational levels. However, some challenges remain, including:

  • Need for better communication of priorities to government stakeholders
  • Concerns about sustainability due to the fast-paced implementation of action plans

Overall, Luxembourg has made significant progress in combating ML and TF, but there are still areas that require improvement. The country’s strong coordination and cooperation mechanisms will be crucial in addressing these challenges and maintaining its position as a leading international financial center.