Financial Crime World

Luxembourg Financial Institutions Face New Regulatory Requirements

The Commission de Surveillance du Secteur Financier (CSSF) has issued a new circular, number 22/821, which introduces significant changes to the regulatory requirements for credit institutions and Luxembourg branches of non-EU credit institutions.

Key Changes

  • The circular replaces the long-form report previously required under Circular 01/27 with a self-assessment questionnaire (SAQ) and introduces Agreed Upon Procedures (AUP) reports.
  • The SAQ is a comprehensive questionnaire that covers various topics, including internal governance, IT risk, credit risk, large exposures, related parties, foreign branches, MiFID, PSD 2, depositary bank, and consolidation aspects.

Implementation Timeline

  • Effective December 31, 2022: All Luxembourg credit institutions and Luxembourg branches of non-EU credit institutions must comply with the new requirements.
  • Circular applies only to institutions that close their financial year on or after December 31, 2022.
  • First deadline for completing SAQ is April 2023 based on financial year 2022 information.

AUP Reports

  • The REA will prepare AUP reports focusing on specific topics from the SAQ, including MiFID and PSD 2.
  • AUP reports will be performed on a three-year plan defined by the CSSF.

Additional Requirements

  • Separate reports on the protection of financial instruments and funds belonging to clients must be prepared annually by the REA.
  • Reports must cover specific requirements outlined in Grand-ducal Regulation 30 May 2018.
  • Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) procedures must also be reported annually.

Repeal of Circulars

  • The circular repeals CSSF Circular 01/27 as amended and IML Circular 96/125, which dealt with the supervision of credit institutions on a consolidated basis.

Next Steps

  • Financial institutions are advised to carefully review the new requirements and prepare for compliance.
  • The CSSF has made the circular available in English only on its website.
  • For further guidance and support in ensuring compliance with these regulations, financial institutions can contact [firm name]’s Governance, MIFID, and AML experts.