Financial Crime World

Luxembourg Falls Short on Anti-Money Laundering and Counter-Terrorist Financing Measures

A recent review of Luxembourg’s anti-money laundering (AML) and counter-terrorist financing (CFT) measures has revealed several shortcomings, including inadequate application of sanctions and limited criminal fines.

Inadequate Detection and Investigation of Money Laundering Cases

The report found that Luxembourg has not done enough to detect, investigate, and prosecute money laundering cases related to higher-risk predicate offenses. Additionally, the country’s asset recovery office, management office, and investigative judge have not been adequately equipped to carry out their mandates.

Lack of Understanding about Terrorist Financing Risks and Vulnerabilities

Furthermore, the review highlighted a lack of understanding among public and private stakeholders about terrorist financing risks and vulnerabilities, particularly in the non-profit sector.

The report also criticized Luxembourg for its delayed execution of incoming mutual legal assistance (MLA) requests requiring coercive measures, with approximately 30% of such requests taking longer than seven months to execute.

International Cooperation

In terms of international cooperation, Luxembourg has provided constructive and good-quality mutual legal assistance, extradition, and asset recovery. However, timeliness is an issue in some cases, particularly for MLA requests requiring coercive measures.

Recommendations for Improvement

The review made several recommendations to improve Luxembourg’s AML/CFT regime, including:

  • Strengthening Detection and Investigation: Strengthen the detection, investigation, and prosecution of parallel money laundering investigations related to higher-risk predicate offenses.
  • Enhancing Capacity: Enhance the capacity of the asset recovery office, management office, and investigative judge.
  • Developing Understanding of Terrorist Financing Risks: Develop and disseminate a better understanding of terrorist financing risks and vulnerabilities.
  • Improving Risk-Based Supervision: Improve the application of risk-based AML/CFT supervision, particularly for designated non-financial businesses and professions (DNFBPs).
  • Ensuring Proportionate Penalties: Ensure that penalties and remedial measures are proportionate and dissuasive.

Areas of Strength

The report also highlighted several areas where Luxembourg has scored well, including its technical compliance with international standards.

Conclusion

Overall, while Luxembourg has made progress in some areas, it still faces significant challenges in implementing effective AML/CFT measures. The country must take urgent action to address these shortcomings and ensure that its financial sector is not exploited for illicit purposes.