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Luxembourg Regulator Cracks Down on Non-Compliant Banks

The Commission de Surveillance du Secteur Financier (CSSF), Luxembourg’s financial regulator, has been taking a tough stance against banks that refuse to provide accounting information or engage in other non-compliant activities.

Severe Penalties for Non-Compliance

According to the CSSF, banks that fail to comply with regulations can face severe penalties, including:

  • Fines of up to €250,000
  • Temporary or permanent prohibition on executing operations or activities
  • In extreme cases, directors and senior managers may even be banned from participating in the profession

Regulatory Enforcement Actions

The regulator has been cracking down on banks that provide incomplete, incorrect or false documentation, which can preclude the performance of its powers and contravene rules governing the publication of balance sheets and accounts.

Additionally, the CSSF may impose:

  • A coercive fine of up to €1,250 per day to compel banks to comply with injunctions
  • Require the removal or replacement of members of the management body or authorized persons

Enforcement Actions by Area

The CSSF has taken enforcement action in several areas, including:

  • Anti-money laundering and countering the financing of terrorism (AML/CFT)
    • Conducted 9 on-site inspections related to AML/CFT in 2020
  • Corporate governance
    • Conducted 9 on-site inspections related to corporate governance in 2020
  • Depositary functions

Government Takeovers

In extreme cases, banks that are failing or likely to fail may be taken over by the government or regulatory authorities. According to the Law of 18 December 2015 on the resolution, reorganisation and winding-up measures of credit institutions and certain investment firms, the Resolution Board (the CSSF acting as resolution authority) may take control of a bank if it meets certain conditions.

Resolution Principles

The resolution of banks is subject to several general principles, including:

  • Fairness
  • Priority of claims
  • Protection of covered deposits
  • Minimizing the impact on other group entities and the whole group when exercising resolution powers

Conclusion

In conclusion, the CSSF is taking a firm stance against non-compliant banks in Luxembourg, imposing severe penalties for those that fail to comply with regulations. The regulator’s actions are aimed at ensuring the sound and prudent management of banks and protecting the interests of various stakeholders.