Financial Crime World

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Luxembourg’s AML/CFT Efforts: Timely Sanctions and Limited Fines Needed

The international community is urging Luxembourg to strengthen its anti-money laundering (AML) and counter-terrorism financing (CFT) measures, citing delays in executing mutual legal assistance requests and limited criminal fines for non-compliance.

Progress Made but Challenges Remain

According to a recent report, Luxembourg has made progress in providing constructive and good-quality mutual legal assistance, extradition, and asset recovery. However, the country’s authorities have faced challenges in responding promptly to incoming MLA requests requiring coercive measures, with around 30% of such requests taking longer than seven months to execute.

Recommendations for Improvement

To address these concerns, Luxembourg has been tasked with implementing several priority actions:

  • Strengthening the capacity of its Asset Recovery Office, Asset Management Office, and Investigative Judge to better carry out their mandates on asset investigations, post-conviction asset investigations, and international cooperation.
  • Enhancing risk-based AML/CFT supervision for designated non-financial businesses and professions (DNFBPs), including increasing supervisory resources.
  • Improving the understanding of terrorist financing risks and vulnerabilities, particularly in the not-for-profit sector.
  • Ensuring that penalties and remedial measures are proportionate and dissuasive, and applied in a timely and effective manner to ensure compliance by financial institutions, DNFBPs, and virtual asset service providers (VASPs).
  • Reducing delays in executing incoming MLA requests on coercive measures.

Limited Fines Imposed

In a related development, Luxembourg has imposed limited criminal fines on entities for not maintaining or updating lists of members or registers of shares. This lack of enforcement action has been criticized by international authorities as insufficient to deter non-compliance.

International Cooperation Crucial

Luxembourg’s status as an international financial center underscores the importance of international cooperation in combating money laundering and terrorist financing. The country must continue to provide constructive and good-quality mutual legal assistance, extradition, and asset recovery to its foreign counterparts.

Conclusion

In conclusion, Luxembourg faces a critical challenge in strengthening its AML/CFT measures to align with international standards. The country’s authorities must prioritize timely sanctions and remedial measures to promote compliance and deter non-compliance. International cooperation will also be crucial in ensuring that Luxembourg’s efforts are effective and proportionate.