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Luxembourg Needs to Step Up Its Game in Money Laundering Fight

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Luxembourg’s robust anti-money laundering framework is being put to the test as the country grapples with a complex web of international financial flows, high-risk products and services, and an ever-evolving threat landscape.

FATF Assessment Highlights Areas for Improvement

A recent assessment by the Financial Action Task Force (FATF) has highlighted areas where Luxembourg can improve its game in detecting and combating money laundering and terrorist financing. While authorities have demonstrated good use of financial intelligence and effective co-operation with international counterparts, there is a need for more focus on investigations, prosecutions, asset recovery, and supervision of non-profit organisations.

Key Areas for Improvement

• Investigations: Authorities need to improve detection, investigation, and prosecution of complex money laundering cases.
• Asset Recovery: The country’s asset recovery process needs improvement, although it has been effective in responding to requests from foreign counterparts.
• Non-Financial Sectors: There is a lack of risk-based supervision in non-financial sectors such as real estate and notaries.
• Non-Profit Organisations: Authorities need to improve oversight of these organisations, which have a poor understanding of terrorist financing risk.

Financial Sector Vulnerabilities

Luxembourg’s large and diverse financial sector, including banking, investment, and trust and company service sectors, are among the most vulnerable to money laundering and terrorist financing. While the country’s financial supervisor has taken steps to address these risks through a multipronged approach, there is still more work to be done.

Financial Intelligence Unit

The FIU plays a crucial role in producing high-quality financial intelligence products, but it needs to ensure that it can continue to do so with limited resources.

Terrorist Financing Concerns

In terms of terrorist financing, while Luxembourg proactively identifies and investigates activity alongside terrorism-related investigations, these efforts have not yet led to prosecutions or convictions due to mitigating measures and the country’s risk profile.

Recommendations for Improvement

• Authorities need to improve oversight of non-profit organisations.
• The asset recovery process needs improvement.
• Investigations into terrorist financing cases need to lead to prosecutions and convictions.

Conclusion

Luxembourg’s authorities need to focus on addressing these gaps and weaknesses to ensure that the country remains a reliable partner in the global fight against money laundering and terrorist financing.