Financial Crime World

Luxembourg Takes Bold Steps to Combat Financial Crime with New Regulatory Requirements

Strengthening Anti-Money Laundering and Counter-Terrorist Financing Regulations for Investment Fund Managers

In a bid to stay ahead of the growing threat of financial crime, Luxembourg’s financial regulator, the Commission de Surveillance du Secteur Financier (CSSF), has issued three circulars aimed at strengthening anti-money laundering and counter-terrorist financing (AML/CTF) regulations for investment fund managers (IFMs).

Key Changes and Requirements

  • Circular 21/788 focuses on AML/CTF reporting, governance, and internal controls.
  • Independent auditors (REAs) must verify the responses provided by fund managers in their annual CSSF AML/CTF survey to increase transparency and ensure adequate measures are taken to mitigate financial crime risks.
  • New reporting requirements include a risk-based approach to sample testing or specific procedures, covering topics such as:
    • Entity’s risk-based approach
    • Due diligence on funds and investment assets
    • Delegation and branch oversight

The Importance of Compliance

“To protect themselves and their investors from financial crime, IFMs must comply with regulations and take appropriate steps to ensure that serious financial risks are mitigated,” said Christophe Wintgens, Wealth & Asset Manager Leader at EY Luxembourg.

  • Implementing robust technological solutions
  • Adopting sustainable frameworks
  • Participating in the CSSF AML/CTF survey

Evaluating Processes for AML/CTF Activities

As IFMs navigate the new regulatory landscape, they should take a proactive approach to evaluating their processes and operational factors critical for AML/CTF activities moving forward. This may involve:

  • Reviewing existing policies
  • Data collection methods
  • IT tools
  • Automation processes

The CSSF’s Efforts

The CSSF’s efforts to strengthen AML/CTF regulations are timely, given the growing threat of financial crime in the wake of the COVID-19 pandemic.

  • Urging IFMs to prioritize compliance and take steps to mitigate risks
  • The annual survey serving as a key tool in this effort

Conclusion

“The CSSF AML/CTF survey acts as a great starting point for IFMs across Luxembourg – and Europe – to holistically consider both their approach to protecting their investors’ assets as well as their contribution to promoting and protecting the financial market,” concluded Wintgens.