Luxembourg’s National Risk Assessment (NRA): A Comprehensive Evaluation of Money Laundering and Terrorist Financing Risks
Overview
The Luxembourg National Risk Assessment (NRA) is a thorough document that assesses the country’s exposure to money laundering (ML) and terrorist financing (TF) risks. The NRA evaluates inherent risks, vulnerabilities, and threats, and considers the effectiveness of mitigating factors to determine residual risks.
Inherent Risks
Luxembourg’s economy, openness, and structural factors contribute to its inherent risks, including:
High-Risk Inherent Risks
- Money laundering of foreign proceeds of crime: Very High Risk
- Terrorism and terrorist financing: Moderate Overall Risk
Threats
The table below summarizes Luxembourg’s exposure to ML/TF threats at the level of predicate offenses:
| Predicate Offense | External Exposure | Domestic Exposure | Overall Threat Level |
|---|---|---|---|
| Money Laundering | Very High | Medium | Very High |
| Fraud and Forgery | Very High | High | Very High |
| Tax Crimes | Very High | Medium | Very High |
| Corruption and Bribery | Very High | Medium | Very High |
| Drug Trafficking | High | Medium | High |
| … | … | … | … |
The NRA assesses threats based on a mix of research, data, expert judgment, bilateral meetings, and workshop discussions with judicial authorities. The assessment considers factors such as the probability of the crime occurring, proceeds of the crime, and human, social, and reputational impact.
Vulnerabilities
- Weaknesses in financial institutions’ anti-money laundering (AML) and countering the financing of terrorism (CFT) controls
- Inadequate customer due diligence and know-your-customer (KYC) practices
- Insufficient reporting requirements for suspicious transactions
- Limited cooperation between law enforcement agencies and financial institutions
Mitigating Factors
The NRA assesses the effectiveness of mitigating factors, such as:
Effective Mitigating Factors
- Legislative frameworks and regulations
- AML/CFT compliance programs
- Financial institution risk management practices
- Law enforcement cooperation and intelligence sharing
Residual Risks
After considering mitigating factors, the NRA determines residual risks, which are then used to inform strategic actions and resource allocations for improving Luxembourg’s AML/CFT regime.
The provided text is an excerpt from the Luxembourg National Risk Assessment, which provides a comprehensive understanding of the country’s exposure to ML/TF threats and vulnerabilities.