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Luxembourg Must Strengthen Anti-Money Laundering Measures, Says FATF Report

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A recent report by the Financial Action Task Force (FATF) has identified several areas where Luxembourg must improve its anti-money laundering and counter-terrorist financing (AML/CFT) framework. Despite having a solid foundation in place, the country’s authorities need to focus more on money laundering investigations and prosecutions, as well as asset recovery and supervision of non-profit organizations and certain non-financial sectors.

Key Findings

• Luxembourg is a significant international financial hub with large cross-border financial flows, an international clientele, and high-risk products and services.
• The country has identified foreign predicate offenses, including tax crimes, corruption, and fraud, as its main money laundering threat.

Strengths and Weaknesses

• The report praised Luxembourg’s financial supervisor, the Commission de Surveillance du Secteur Financier (CSSF), for focusing on risk-based supervision of the banking and investment sectors.
• However, it noted that more work needs to be done in terms of risk-based supervision of non-financial sectors such as trust and company services, real estate, and notaries.

Areas for Improvement

• The country should focus more on sectors exposed to significant money laundering risk such as real estate and professionals offering trust and company services.
• Authorities need to improve the detection, investigation, and prosecution of more complex money laundering cases.
• Luxembourg should take a risk-based approach to its oversight of non-profit organizations, including through outreach to increase this sector’s poor understanding of terrorist financing risk.

Domestic Cooperation and Coordination

• Luxembourg has identified foreign predicate offenses, including tax crimes, corruption, and fraud, as its main money laundering threat.
• The country’s Financial Intelligence Unit, CRF-FIU, produces high-quality financial intelligence products, but needs to ensure it can continue to do so given its level of human resources.

Recommendations

• Luxembourg should focus more on domestic asset recovery, but makes effective use of tools to freeze, seize or confiscate assets involving crimes committed abroad when responding to requests from foreign counterparts.
• The country must continue to strengthen its AML/CFT framework to maintain its reputation as a responsible financial center.

Conclusion

Luxembourg is a major player in the international financial system and must continue to strengthen its AML/CFT framework to maintain its reputation as a responsible financial center. The report’s recommendations will help the country improve its efforts to combat money laundering and terrorist financing, ultimately protecting the global financial system.