Financial Crime World

Terrorist Financing Risks in Luxembourg: A Comprehensive Analysis

Key Points

  • Financial Services: Luxembourg’s financial sector offers basic financial services to local and EU customers through retail and business banking, Payment Institutions (PIs), and Electronic Money Institutions (EMIs).
  • AML/CFT Regulation: All Luxembourg financial institutions are fully regulated and supervised for anti-money laundering and counter-terrorism financing purposes by the Financial Supervisory Authority (CSSF).
  • Jurisdictions of Concern: The selected jurisdictions are situated in the Middle East and Northern Africa, as well as Sub-Saharan regions.
  • Financial Flows: For most studied flows, the three jurisdictions ranking first in terms of value account for more than half of the total transactions.

Vulnerable Sectors

Traditional Banking Products

Retail and business banking products (e.g., debit/credit cards, wire transfers, ATM withdrawals) are vulnerable to TF by lone actors, small terrorist cells, or FTFs due to:

  • Easy access to financial services
  • High volume of transactions
  • Limited customer verification

Private Banking

Private banking’s exposure to TF is driven by their size, international exposure, and nature of their clients (i.e., prevalence of big and potentially more sophisticated accounts). This makes it an attractive target for terrorist financiers.

MVTS Sector

The products and activities offered by the MVTS sector allow easy access to fast and convenient cross-border transactions, making it vulnerable to being abused by FTFs, lone actors, and small cells operating within the EU. The main vulnerabilities include:

  • Easy transfer of funds
  • Limited regulatory oversight
  • High volume of transactions

Conclusion

The main TF risks for Luxembourg emanate from the threat that terrorists, terrorist organisations, and their financiers might exploit the vulnerabilities of certain sectors essentially for moving funds. It is essential to implement robust regulations and supervision mechanisms to mitigate these risks and prevent the financing of terrorism.