Financial Crime World

LUXEMBOURG TIGHTENS BELTS ON TERRORIST FINANCING PREVENTION

Warning from the Financial Action Task Force (FATF)

Luxembourg has been urged by the FATF to boost its efforts in combating terrorist financing due to its reputation as an international financial hub making it vulnerable to misuse of funds. Authorities have warned that more needs to be done to prevent terrorism financing risks.

Challenges Identified by the FATF Report

  • Low awareness among market players and competent authorities: The lack of understanding about terrorism financing risk exposure poses a significant challenge.
  • Difficulty in identifying intended recipients of funds: It is challenging for Luxembourg to identify the intended recipient of funds or make a specific link between the recipient and terrorism.

Recommendations from PwC Luxembourg

To mitigate these risks, market players and competent authorities are advised to take the following steps:

1. Acquire Better Understanding of Terrorism Financing Risk Exposure

  • Assessing regularly and monitoring terrorism financing risks is crucial, even in the absence of known threats.
  • Regularly review and update risk assessments to ensure they remain relevant.

2. Expand Terrorism Financing Awareness

  • Due to the high volume and cross-border nature of assets managed and transferred in Luxembourg, the country may be vulnerable to misuse of funds—through their movement and management—or assets linked to terrorist activity.
  • Educate employees about common techniques used for terrorist financing, such as under-invoicing and falsification of trade documents.

3. Perform Due Diligence Adjusted to Terrorism Financing Risk Exposure

  • Gather financial and Know Your Customer (KYC) information properly and run background checks to identify potential terrorism financing risks.
  • Regularly review and update due diligence procedures to ensure they remain effective.

Subject Matter Experts at PwC Luxembourg

PwC Luxembourg has subject matter experts that can help increase awareness and efficiency to mitigate risk exposure. Visit the Anti-Financial Crime and Forensics page to learn more about how PwC Luxembourg can assist in preventing terrorism financing risks.

Key Takeaways from PwC Luxembourg Experts

  • Assessing destination of funds is critical: Terrorism financing goes beyond money laundering as it can be from licit sources.
  • Raising awareness within your company is key: Tailored training, policies and procedures reviews should be considered to prevent terrorism financing risks.