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Luxembourg Fights Against Terrorist Financing Risks Amid Ongoing Global Threats

As its neighbors - Belgium, France, Germany, and the Netherlands - continue to face a series of terrorist attacks, Luxembourg must remain vigilant against the ever-present threat of terrorist financing. The Financial Action Task Force (FATF) has recently assessed Luxembourg’s efforts in this regard, revealing areas where improvement is necessary.

Challenges in Identifying Terrorist Financing

According to the FATF report, identifying the intended recipient of funds and making specific links between recipients and terrorism are significant challenges for Luxembourg’s competent authorities. This lack of transparency hampers the country’s ability to effectively prevent terrorist financing.

Risk of Terrorist Financing Abuse in NGOs

The Grand Duchy has identified a subset of non-governmental organizations (NGOs) that engage in development and humanitarian projects abroad, which may be at risk of terrorist financing abuse. However, the overall understanding of this risk is very low, with the Ministry of Foreign Affairs not currently applying a risk-based approach to its supervision of the sector.

Prevention Measures for Market Players

To better combat terrorism financing risks in Luxembourg, market players must consider additional prevention measures:

• Acquiring a better understanding of their terrorism financing risk exposure
• Expanding awareness within companies
• Performing due diligence adjusted to the terrorism financing risk exposure

Regular Assessments and Monitoring Crucial

Regular assessments and monitoring of terrorism financing risks are essential, even if no known threats exist for the country. The absence of terrorism financing and terrorism cases does not eliminate the potential for funds to be transferred abroad in support of terrorism.

Prioritizing Training and Framework Amendments

In conclusion, Luxembourg must prioritize training and amendments to its internal framework to raise awareness and monitor such risks accordingly within organizations. At PwC Luxembourg, subject matter experts are available to help increase awareness and efficiency in mitigating risk exposure.

Quotes from Experts

“We think that the FATF assessment made it clear that there is still work to be done in terms of terrorism financing prevention,” said Camélia Boudam, Manager, Anti-Financial Crime and Forensics at PwC Luxembourg. “Terrorism Financing goes beyond money laundering as it can be from licit sources. Therefore, assessing the destination of funds is critical.”

“The FATF report highlights the importance of a risk-based approach in supervising the sector, and we expect to see changes in this regard from now on,” added Alessandro Casarotti, Director, Anti-Financial Crime and Forensics at PwC Luxembourg.