Luxembourg Needs to Strengthen Its Fight Against Money Laundering and Terrorist Financing

A Mixed Assessment by the Financial Action Task Force (FATF)

Luxembourg’s anti-money laundering and counter-terrorist financing (AML/CFT) framework has been praised for its robustness, but the country still needs to make significant improvements in several areas. A recent assessment by the FATF highlights both strengths and weaknesses in Luxembourg’s efforts to combat money laundering and terrorist financing.

The Risks of Being a Large International Financial Hub

Luxembourg is vulnerable to money laundering due to its status as a large international financial hub, with significant cross-border financial flows and high-risk products and services. The country’s main money laundering threat comes from foreign predicate offences, including tax crimes, corruption, and fraud.

Areas for Improvement in AML/CFT Framework

• Limited human resources: The Financial Intelligence Unit (CRF-FIU) produces high-quality financial intelligence products but needs to ensure that it can continue to do so given its limited human resources and increasingly complex role.
• Risk-based supervision: Risk-based supervision of non-financial sectors such as real estate and trust and company services is still in its early stages.
• Investigation and prosecution: Luxembourg’s authorities have been praised for their domestic co-operation and co-ordination, but the country needs to improve its investigation and prosecution of money laundering cases.
• Asset recovery: Asset recovery is also a significant concern, with the report noting that Luxembourg should focus more on domestic asset recovery.

Terrorist Financing: Areas for Improvement

Luxembourg has identified several areas where it needs to improve in terms of terrorist financing, including:

• Oversight of non-profit organisations
• Implementation of targeted financial sanctions
• Risk-based approach: The country also needs to develop and communicate its risk-based approach to terrorist financing more effectively to public and private sector stakeholders.

Conclusion

While Luxembourg’s AML/CFT framework is robust, the country still has significant work to do in several areas to strengthen its fight against money laundering and terrorist financing. The FATF report provides a comprehensive assessment of Luxembourg’s measures and highlights key areas for improvement.