Financial Crime World

Luxembourg Must Step Up Fight Against Terrorist Financing and Money Laundering

Luxembourg, a major international financial hub, has a solid anti-money laundering (AML) and counter-terrorist financing (CTF) framework in place. However, the country’s authorities need to focus more on investigations, prosecutions, and supervision of high-risk sectors to tackle money laundering and terrorist financing effectively.

The Grand-Duchy’s AML/CTF Framework: Strengths and Weaknesses

Strengths

  • Domestic Co-operation and Coordination: Luxembourg has a good record of co-operating with international counterparts, providing timely access to beneficial ownership information.
  • Risk-Based Supervision: The Commission de Surveillance du Secteur Financier (CSSF) focuses on the banking and investment sectors, but there is room for improvement in risk-based supervision of non-financial sectors.

Weaknesses

  • Investigations and Prosecutions: Luxembourg needs to improve the detection, investigation, and prosecution of complex money laundering cases.
  • Human Resources: The Financial Intelligence Unit (FIU) faces challenges with limited human resources, hindering its ability to produce high-quality financial intelligence products.
  • Terrorist Financing Risk: While some authorities demonstrate a good understanding of terrorist financing risk, the country needs to further develop and communicate its approach.

High-Risk Sectors

Real Estate Professionals

  • Offering trust and company services
  • Vulnerable to money laundering and terrorist financing

Non-Profit Organisations

  • Require a risk-based approach to oversight, including outreach to increase awareness of terrorist financing risk

Targeted Financial Sanctions Regime

  • Gaps need to be remedied in the recently implemented regime

Recommendations for Luxembourg

  1. Increase Focus on Investigations and Prosecutions: Improve the detection, investigation, and prosecution of complex money laundering cases.
  2. Enhance Risk-Based Supervision: Implement effective risk-based supervision of non-financial sectors, including real estate professionals offering trust and company services.
  3. Develop a Comprehensive Approach to Terrorist Financing: Further develop and communicate its approach to tackling terrorist financing risk.

By addressing these areas, Luxembourg can strengthen its efforts in combating money laundering and terrorist financing, ensuring the integrity of its financial system and reducing the risks associated with high-risk sectors.