Financial Crime World

Luxembourg’s Anti-Money Laundering Framework Falls Short

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Luxembourg, a major international financial hub, has been deemed to have a solid anti-money laundering and counter-terrorist financing framework by international standards. However, the country still faces significant challenges in tackling money laundering and terrorist financing risks.

Challenges in Tackling Money Laundering and Terrorist Financing Risks

According to a recent assessment by the Financial Action Task Force (FATF), Luxembourg needs to focus more on investigations and prosecutions, asset recovery, and supervision of non-profit organizations and certain non-financial sectors. The country’s status as an international financial center makes it vulnerable to money laundering threats, particularly in the banking and investment sectors.

Primary Risks

  • Foreign predicate offenses, including tax crimes, corruption, and fraud
  • Terrorist financing risks due to its status as an international financial center

Weaknesses in Luxembourg’s Anti-Money Laundering Framework

Key weaknesses identified by the FATF include:

Insufficient Focus on Money Laundering Investigations and Prosecutions

  • Limited supervision of non-profit organizations and certain non-financial sectors
  • Need for improved detection, investigation, and prosecution of complex money laundering cases

Gaps in Targeted Financial Sanctions Regime for Terrorist Financing

  • Timely access to beneficial ownership information is not available for all financial institutions

Strengths of Luxembourg’s Anti-Money Laundering Framework

Despite the identified weaknesses, Luxembourg has been praised for:

Robust Domestic Co-operation and Co-ordination

  • Good understanding of terrorist financing risks
  • Proactive steps taken to investigate and identify terrorist financing activity

Recommendations for Improvement

To address the identified weaknesses, Luxembourg should focus on:

Improving Risk-Based Supervision

  • Enhancing detection, investigation, and prosecution of complex money laundering cases
  • Developing and communicating a clear understanding of terrorist financing risks to public and private sector stakeholders
  • Strengthening asset recovery efforts and targeted financial sanctions regime for terrorist financing