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Luxembourg Finalises First Vertical Risk Assessment on Terrorist Financing

A Crucial Step in Preventing and Combating Terrorism Financing

The Ministry of Justice in Luxembourg has completed its first-ever vertical risk assessment on terrorist financing, a significant step towards identifying and mitigating the risks associated with this serious crime. The assessment was conducted by the Anti-Money Laundering and Terrorist Financing Prevention Committee (BC/TF Prevention Committee) and adopted on May 17, 2022.

Understanding the Assessment

The vertical risk assessment complements the National Risk Assessment updated in December 2020 and focuses specifically on terrorist financing risks. It examines different types of terrorist actors and their funding needs, as well as analyzing terrorist attacks in regions linked to Luxembourg by geography or financial ties. The report identifies areas where vulnerabilities exist.

Key Findings

The main findings of the vertical risk assessment reveal that:

• Non-profit organizations conducting development and humanitarian projects abroad are at high risk of terrorist financing, due to both the donations they receive and the destination of their funds.
• Retail and merchant banks, as well as money or value transfer services, are vulnerable to abuse by lone actors, small terrorist cells, or foreign terrorist fighters.
• Private banking and investment sectors are less vulnerable due to the nature of their products and services, although they may still be exploited by wealthy international terrorist financiers seeking to shelter assets.

Mitigating Risks

To combat these risks, Luxembourg has a comprehensive legal framework in place for combating money laundering and terrorist financing, aligned with FATF recommendations and EU directives. The specific mitigating factors addressed in the vertical risk assessment are detailed in the report, which is available upon request from the Ministry of Justice.

A Milestone in Preventing Terrorism Financing

The completion of this first vertical risk assessment on terrorist financing marks an important milestone in Luxembourg’s efforts to prevent and combat this serious crime.