Financial Crime World

Luxembourg National Risk Assessment Reveals High Inherent ML/TF Risks

A recent comprehensive joint report by over 15 agencies and more than 50 specific contributors has highlighted the high inherent risks of money laundering (ML) and terrorist financing (TF) in Luxembourg. The assessment, which involved over 100 bilateral discussions and thousands of data points, provides a thorough examination of the country’s economy, openness, and structural factors.

Economic Model Contributes to High Inherent ML/TF Risks

Luxembourg’s economic model, which has made it an attractive location for legitimate businesses, also contributes to its high inherent ML/TF risks. The country’s role as a large financial center and its openness to international trade and investment make it vulnerable to criminal activities.

Primary Threats Identified

According to the assessment, the primary threats to Luxembourg come from money laundering of foreign proceeds of crime, with domestic exposure to money laundering significantly smaller. The report also identifies moderate overall risks related to terrorism and terrorist financing.

Methodology and Findings

The report’s findings are based on a thorough analysis of over 50 specific contributors, including expert judgement, bilateral meetings, and a workshop group discussion with judicial authorities. The assessment was conducted using the FATF (Financial Action Task Force) methodology, which considers factors such as:

  • Probability of crime occurring
  • Proceeds of crime if occurring
  • Human, social, and reputational impact

Some key findings from the report include:

  • Money laundering is considered a “very high” risk in Luxembourg, with exposure primarily coming from foreign proceeds of crime.
  • Fraud and forgery are also classified as “very high” risk, while tax crimes, corruption, and bribery are deemed “high” risk.
  • The report identifies moderate overall risks related to terrorism and terrorist financing.

Recommendations and Strategic Implications

The report’s executive summary highlights the strategic implications for improving Luxembourg’s anti-money laundering (AML) and combating the financing of terrorism (CFT) regime. The assessment recommends prioritizing strategic actions and resource allocations to mitigate these risks, ensuring the country remains a safe and secure financial hub.

Conclusion

The joint report’s findings will inform strategic decisions on improving Luxembourg’s AML/CFT regime, providing a solid foundation for the country to continue its efforts in combating ML/TF.