Luxembourg Needs to Enhance Anti-Money Laundering Efforts
======================================================
Luxembourg’s anti-money laundering (AML) and counter-terrorism financing (CFT) framework has been deemed solid by the Financial Action Task Force (FATF). However, there are still areas that require improvement. According to FATF’s assessment, Luxembourg should focus on money laundering investigations and prosecutions, asset recovery, and supervision of non-profit organizations and some non-financial sectors.
Vulnerabilities in the System
As a major international financial hub, Luxembourg is susceptible to money laundering and terrorist financing due to its significant cross-border financial flows, international clientele, and high-risk products and services. The country has identified foreign predicate offenses, including tax crimes, corruption, and fraud, as its main money laundering threat.
Prioritizing the Banking and Investment Sectors
Luxembourg’s financial supervisor, the Commission de Surveillance du Secteur Financier (CSSF), has prioritized the banking and investment sectors using a risk-based approach to supervision. However, the CSSF still needs to improve its oversight of non-financial sectors, including:
- Trust and company services
- Real estate
- Notaries
Key Areas for Improvement
Focus on High-Risk Sectors
Luxembourg should focus on sectors exposed to significant money laundering risk, such as:
- Real estate
- Professionals offering trust and company services
Improving Complex Money Laundering Case Detection and Prosecution
The country needs to improve the detection, investigation, and prosecution of complex money laundering cases.
Developing Understanding of Terrorist Financing Risk
Luxembourg should further develop its understanding of terrorist financing risk and communicate this to public and private sector stakeholders.
Areas for Enhancement
Domestic Asset Recovery
Luxembourg needs to focus on domestic asset recovery, but it has been effective in responding to foreign requests for asset freezes, seizures, or confiscations. The country still needs to develop its targeted financial sanctions regime and demonstrate its effectiveness.
Risk-Based Approach to Non-Profit Organizations
The country should take a risk-based approach to overseeing non-profit organizations, including through outreach to increase awareness of terrorist financing risk.
Conclusion
Luxembourg’s anti-money laundering and counter-terrorism financing framework has been deemed solid by FATF. However, the country still needs to address several areas of improvement. By focusing on high-risk sectors, improving complex money laundering case detection and prosecution, developing understanding of terrorist financing risk, and enhancing domestic asset recovery, Luxembourg can further strengthen its AML/CFT framework.