Financial Crime World

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Luxembourg’s Fight Against Money Laundering and Terrorist Financing: Progress, Challenges, and Recommendations

LUXEMBOURG - A recent review of Luxembourg’s anti-money laundering (AML) and counter-terrorist financing (CFT) measures has highlighted both the country’s strengths and weaknesses in combating these threats.

Enforcement Measures

While Luxembourg has implemented a range of enforcement measures to address non-compliance, critics argue that they have been insufficiently dissuasive and effective. The country’s financial intelligence unit, the Commissariat aux Assurances (CAA), has made limited use of its sanctioning power, and sanctions imposed on DNFBP sectors, such as real estate agents and notaries, are considered too lenient.

Transparency and Beneficial Ownership Requirements

The review also identified gaps in transparency and beneficial ownership (BO) requirements. While all legal persons incorporated in Luxembourg must register basic information with the Trade and Company Register (RCS), and BO information is required to be registered since 2019, there is a need for better understanding of how legal persons could be misused for money laundering.

Recommendations

To address these challenges, the review recommends that Luxembourg:

  • 1. Substantially strengthen the detection, investigation, and prosecution of parallel ML investigations related to all higher risk predicate offenses.
  • 2. 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.
  • 3. Further develop and disseminate its understanding of TF risks and vulnerabilities, including misuse of legal persons for TF purposes, stemming from its exposure as an international financial centre.

Effectiveness and Technical Compliance Ratings

Luxembourg’s effectiveness and technical compliance ratings were assessed as follows:

  • Effectiveness Ratings: Substantial (IO.1-4), Moderate (IO.5-8), and Low (IO.9-11)
  • Technical Compliance Ratings: C (R.1, 3, 6, 10-12) and LC (R.2, 4, 5, 7, 8, 13-15)

Conclusion

The review emphasizes the need for Luxembourg to take effective steps to reduce delays in the execution of incoming MLA requests on coercive measures, ensure that penalties and remedial measures are proportionate and dissuasive, and apply them in a timely and effective manner.