Financial Crime World

Luxembourg Fights Against Money Laundering and Terrorist Financing: A Comprehensive System in Place

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Luxembourg is a major international financial center, characterized by a large number of institutions, significant assets under management, and cross-border flows. As such, it is subject to various money laundering (ML) and terrorist financing (TF) risks. To combat these threats, the country has put in place a comprehensive system covering prevention, detection, prosecution, and asset recovery.

National Risk Assessment

The National Risk Assessment (NRA) is periodically updated to identify, assess, and understand ML/TF risks in Luxembourg. The latest NRA highlights that the inherent risks associated with ML/TF are linked to the international financial center, with mitigating factors reducing the residual risk level.

Financial Sector

A Key Focus Area for ML/TF Mitigation Measures

The financial sector has been a key focus area for ML/TF mitigation measures, with a good understanding of the risks and consistent application of anti-money laundering (AML) and counter-terrorist financing (CFT) measures.

Threats to Luxembourg

Main Threats

  • Laundering of proceeds from predicate offenses committed abroad
  • Moderate terrorist financing threat

International Cooperation

  • Received numerous international letters rogatory for asset seizure related to ML/TF cases
  • Most suspicious transaction reports concerning cross-border transactions, foreigners, or suspicious acts carried out abroad

Holding Companies and Investment Vehicles

AML/CFT Rules Apply Equally

Holding companies, investment companies, and investment vehicles are subject to the same AML/CFT rules as any other company in Luxembourg. Professionals advising on their creation must:

  • Identify clients
  • Assess business purposes
  • Conduct ongoing due diligence
  • Report suspicious transactions
  • Cooperate with supervisory authorities

Convictions and Penalties

2019 Conviction Statistics

In 2019, 361 people were convicted for ML, with 217 receiving prison sentences.

Comprehensive AML/CFT System

The country has a comprehensive AML/CFT system, which includes the Law of 12 November 2004 on the fight against money laundering and terrorist financing as its cornerstone. This law has been amended several times to transpose European Directives, extend its scope, and harmonize supervisory powers.

Supervisory Authorities

Increased Engagement with Professionals

Supervisors have increased their engagement with professionals, conducting:

  • Over 250 on-site inspections in 2019
  • Desk-based inspections
  • Applied over 90 corrective measures to address non-compliance with professional obligations

Centre de Recherche et d’Action pour la Prévention du Bluffage (CRF)

Independent and Autonomous Agency

The CRF is an independent and autonomous agency that:

  • Receives and analyzes suspicious transaction reports
  • Disseminates the results of its analyses to competent national authorities and foreign counterparts
  • Has access to a wide range of databases, significant IT capacity, and the power to freeze assets for an indefinite period
  • Can freeze cash for up to three months upon request of the Customs and Excise Administration (ADA)

Conclusion

With this comprehensive system in place, Luxembourg is well-equipped to combat ML/TF risks and maintain its reputation as a secure and reliable financial center.