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Luxembourg’s Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) Regime
The Financial Action Task Force (FATF) has evaluated Luxembourg’s AML/CTF regime, assessing its effectiveness and technical compliance with international standards.
Areas for Improvement
There are several areas where Luxembourg can improve its AML/CTF efforts:
- Enhance Investigation and Prosecution: Strengthen the detection, investigation, and prosecution of parallel money laundering investigations related to higher-risk predicate offenses.
- Improve Asset Recovery Capacity: Enhance the capacity of the Asset Recovery Office (ARO), the Asset Management Office (AMO), and the Office of the Investigative Judge to better carry out their mandates on asset investigations, post-conviction asset investigations, asset management, and international cooperation.
- Develop a Better Understanding of Terrorist Financing Risks: Develop a better understanding of terrorist financing risks and vulnerabilities, including misuse of legal persons for TF purposes, stemming from its exposure as an international financial center.
- Implement Risk-Based Approach for Non-Profit Organizations: Ensure that the Ministry of Foreign Affairs develops and implements procedures to apply risk-based approach (RBA) to its oversight of the non-profit organization (NPO) sector and undertakes systematic outreach to enhance the sector’s poor understanding of terrorist financing risk.
Progress Made
Despite areas for improvement, Luxembourg has made progress in several key areas:
- Beneficial Ownership Information: Demonstrating an effective use of a multi-pronged approach to satisfy themselves of the accuracy and availability of beneficial ownership information.
- Mutual Legal Assistance and Extradition: Providing constructive and good-quality mutual legal assistance, extradition, and asset recovery (including asset repatriation) in a timely manner.
Effectiveness Ratings
The effectiveness ratings for Luxembourg’s AML/CTF regime are as follows:
| Area | Rating |
|---|---|
| Risk, policy, and coordination | Substantial |
| International cooperation | Substantial |
| Supervision | Moderate |
| Preventive measures | Moderate |
| Legal persons and arrangements | Substantial |
| Financial intelligence | Substantial |
| ML investigation & prosecution | Moderate |
| Confiscation | Moderate |
| TF investigation & prosecution | Substantial |
| TF preventive measures & financial sanctions | Moderate |
Technical Compliance Ratings
The technical compliance ratings for Luxembourg’s AML/CTF regime are as follows:
| Area | Rating |
|---|---|
| Assessing risk & applying risk-based approach | C |
| National cooperation and coordination | C |
| Money laundering offence | C |
| Confiscation & provisional measures | LC |
| Terrorist financing offence | LC |
| Targeted financial sanctions – terrorism & terrorist financing | C |
| Targeted financial sanctions - proliferation | C |
| Non-profit organisations | PC |
| Financial institution secrecy laws | C |
| Customer due diligence | C |
| Record keeping | C |
| Politically exposed persons | C |
| Correspondent banking | LC |
| Money or value transfer services | C |
| New technologies and innovative risk management approaches | PC |
Note: Ratings are based on the FATF’s evaluation of Luxembourg’s AML/CTF regime.