Financial Crime World

Luxembourg Fails to Effectively Enforce Sanctions and AML Measures, Report Finds

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A recent report has raised concerns over Luxembourg’s ability to effectively enforce anti-money laundering (AML) and counter-terrorism financing (CFT) measures, as well as its timeliness in applying sanctions.

Lack of Effective Enforcement

The report found that Luxembourg had failed to substantially strengthen the detection, investigation, and prosecution of money laundering cases related to higher-risk predicate offenses. This has resulted in a significant proportion of incoming mutual legal assistance (MLA) requests requiring coercive measures being executed outside of the recommended timeframe.

  • Criminal fines imposed for non-compliance with AML/CFT regulations have been limited.
  • Penalties and remedial measures are not always applied in a timely or effective manner, leading to a perception that the risk of non-compliance is low.
  • This lack of deterrent has led to a potential increase in non-compliant behavior.

International Cooperation Concerns

The report also highlighted concerns over international cooperation, stating that while Luxembourg has consistently provided constructive and good-quality mutual legal assistance, there are delays in executing incoming MLA requests requiring coercive measures.

Recommendations for Improvement

To address these issues, the report recommends several priority actions:

  • Strengthen AML/CFT supervision by enhancing comprehensiveness of off-site monitoring and on-site inspections.
  • Enhance capacity of key authorities, including the Asset Recovery Office (ARO), Asset Management Office (AMO), and Investigative Judge’s Office.
  • Develop a better understanding of terrorist financing risks and vulnerabilities.
  • Ensure that penalties and remedial measures are proportionate, dissuasive, and applied in a timely and effective manner.
  • Take steps to reduce delays in executing incoming MLA requests requiring coercive measures.

Effectiveness Ratings

The report’s effectiveness ratings for Luxembourg’s AML/CFT regime are as follows:

  • International cooperation: Moderate
  • Supervision: Substantial
  • Preventive measures: Moderate
  • Legal persons and arrangements: Substantial

Technical Compliance Ratings

The report’s technical compliance ratings for Luxembourg’s AML/CFT regime are as follows:

  • Risk assessment and application of risk-based approach: C (Compliant)
  • National cooperation and coordination: C
  • Money laundering offence: C
  • Confiscation and provisional measures: LC (Partially Compliant)
  • Terrorist financing offence: C
  • Targeted financial sanctions: LC

Conclusion

The report’s findings highlight the need for Luxembourg to take immediate action to strengthen its AML/CFT regime and ensure that it is effectively enforcing international standards. Failure to do so may result in further scrutiny from the international community and potentially even sanctions being imposed against the country.