Financial Crime World

Luxembourg’s AML/CFT Efforts Receive High Marks from FATF

In its latest Mutual Evaluation Report, the Financial Action Task Force (FATF) has given Luxembourg high marks for its efforts to combat money laundering and terrorist financing. The report praises Luxembourg’s AML/CFT framework, placing it among the best-rated member countries.

Highlights of the Report

  • Luxembourg’s AML/CFT framework is considered robust and effective.
  • The country has made consistent efforts to strengthen its regime since the previous evaluation.
  • Some areas for improvement include:
    • Awareness of terrorist and proliferation financing in non-financial businesses and professions.

EU Warns of Growing ML/TF Risks

In a separate opinion released on July 13, 2023, the European Banking Authority (EBA) warned of growing money laundering and terrorist financing risks affecting the EU financial sector. The EBA notes that while EU restrictive measures have been effective in countering Russia’s invasion of Ukraine, new risks are emerging.

Key Findings

  • New risks include the laundering of proceeds from environmental crimes and cybercrimes.
  • Competent authorities must improve their understanding of certain risks, including those associated with:
    • Human trafficking
    • Environmental crime
    • Large-scale cross-border cash transfers
  • Authorities should assess the effectiveness and adequacy of AML/CFT systems and controls in financial institutions.

Luxembourg’s Regulator Issues Circulars Endorsing EBA Guidelines

In response to the EBA opinion, Luxembourg’s financial regulator, the Commission de Surveillance du Secteur Financier (CSSF), has issued circulars endorsing two new guidelines from the EBA. The guidelines aim to reduce the practice of “de-risking” by encouraging a more tailored and incremental approach to managing ML/TF risks.

New Guidelines

  • The first guideline sets out specific risk-sensitive measures and risk factors that should be considered when entering into business relationships with not-for-profit organizations.
  • The second guideline provides policies and controls for effectively managing ML/TF risks when providing access to financial services.
  • Both guidelines came into effect on November 3, 2023, and apply to all credit and financial institutions in Luxembourg.