Financial Crime World

Luxembourg’s Efforts in Combating Money Laundering and Financing of Terrorism

Luxembourg has made significant strides in implementing anti-money laundering (AML) and combating the financing of terrorism (CFT) measures, but there are still areas that require improvement. A recent assessment by international authorities highlights both strengths and weaknesses in the country’s efforts to combat money laundering and financing of terrorism.

Supervisory Framework

The LoFS 93 has provided the main basis for AML/CFT preventive measures in Luxembourg. While it has been supplemented by 60 circulars issued by the Luxembourg Financial Supervisory Authority (CSSF), these guidelines do not have direct force of law. However, they provide valuable guidance to financial professionals on implementing provisions of the AML/CFT legislation.

Key Points:

  • LoFS 93 is the main basis for AML/CFT preventive measures
  • Circulars issued by CSSF provide additional guidance but lack direct force of law

Bank Secrecy and Information Sharing

Luxembourg has a strong bank secrecy tradition, but there are mechanisms in place to permit access to information needed by foreign and national authorities responsible for financial sector supervision. In 2001, the CSSF issued a circular reminding banks to cooperate and refrain from systematically objecting on the grounds of bank secrecy.

Key Points:

  • Bank secrecy is traditionally strong in Luxembourg
  • Mechanisms are in place for accessing information for supervisory purposes

Customer Identification and Due Diligence

Anonymous accounts are prohibited in Luxembourg, and customer identification procedures are mandated by law for customers without distinction between natural and legal persons. However, there can be difficulties in identifying the ultimate beneficial owner, which is a requirement of LoFS 93.

Key Points:

  • Anonymous accounts are prohibited
  • Customer identification procedures are mandatory
  • Difficulties may arise in identifying the ultimate beneficial owner

Business with Non-Residents

Most business conducted by banks and other financial professionals in Luxembourg relates to non-residents. While this business is subject to the same controls for AML/CFT purposes as resident business, there is no requirement for enhanced due diligence for non-resident business.

Key Points:

  • Most business is conducted with non-residents
  • No enhanced due diligence required for non-resident business

Reporting and Record-Keeping

Records of customer identification and transactions must be kept for at least five years. The authorities also require financial institutions to report suspicious transactions to the Financial Intelligence Unit (FIU).

Key Points:

  • Records must be kept for at least five years
  • Suspicious transactions must be reported to FIU

Assessment by International Authorities

The recent assessment conducted using the October 11, 2002 version of Methodology for assessing compliance with the AML/CFT international standard has highlighted both strengths and weaknesses in Luxembourg’s efforts to combat ML and FT. While the country has made significant progress in implementing AML/CFT measures, there are still areas that require improvement.

Key Points:

  • Assessment highlights both strengths and weaknesses
  • Areas for improvement identified

Conclusion

Luxembourg’s efforts to combat money laundering and financing of terrorism are commendable, but there is still room for improvement. The authorities must continue to work towards strengthening their supervisory framework, improving information sharing between financial institutions, and enhancing customer due diligence. By doing so, Luxembourg can ensure a safer and more stable financial system.

Key Points:

  • Room for improvement identified
  • Authorities must continue to strengthen supervisory framework and improve information sharing