Financial Crime World

Here is the converted article in markdown format:

Transformation of Luxembourg’s Private Banking Industry

=====================================================

Overview

The lifting of banking secrecy in 2010 marked a significant turning point for Luxembourg’s private banking industry. As a result, the sector underwent a profound transformation, shifting its focus from mass affluent clients to high net worth individuals and family offices.

Key Developments

Transformation Post-Banking Secrecy

  • The industry had to adapt to new regulations and requirements, such as the exchange of information.
  • Private banks in Luxembourg now serve a more affluent client base, with a focus on wealth structuring and succession planning.

Growth in Assets Under Management (AuM)

  • Growing AuM: Assets under Management in Private Banking have grown at a compound annual growth rate of 6.6% since 2011, reaching EUR 585bn as of the end of 2022.
  • The industry has moved towards a fee-based advice model, where clients are charged directly for investment management and advice.

Growing Complexity in International Wealth Structuring

  • Luxembourg’s value proposition in Private Wealth Management lies in its ability to provide sophisticated wealth structuring solutions, which will continue to grow in complexity.

Tax Compliance and Governance

With increasing scrutiny from tax authorities and looming economic downturns, banks are advised to establish their own tax strategy, assign clear responsibilities within their organizations, and thoroughly document their governance framework. This will help mitigate risks for both the organization and its executives.

Key Takeaways

  1. The Luxembourg private banking industry has successfully transformed post-banking secrecy.
  2. High net worth clients now dominate the market, with a focus on wealth structuring and succession planning.
  3. Assets under Management in Private Banking have grown significantly over the past ten years.
  4. The industry has shifted towards a fee-based advice model.
  5. Tax compliance and governance are crucial in mitigating risks for both organizations and executives.