Financial Crime World

Luxembourg Faces Timeliness Issues in AML Requests

Combatting Money Laundering and Terrorist Financing Efforts

Luxembourg has made significant progress in combating money laundering and terrorist financing (ML/TF), but concerns have been raised over the timeliness of some requests. According to a recent evaluation, approximately 30% of incoming MLA requests requiring coercive measures took longer than seven months to execute.

A Financial Hub with Unique Challenges

Luxembourg is an international financial centre with a large and interconnected financial system. The country’s financial sector contributes significantly to its GDP, with the banking sector being home to over 120 credit institutions from 24 countries. Luxembourg is also a leading centre for investment funds, with over EUR 5,545 billion in net assets under management.

However, this global connectivity also presents challenges in terms of ML/TF risks. The country’s financial sector is vulnerable to foreign predicate offences, including:

  • Fraud and forgery
  • Tax crimes
  • Corruption and bribery
  • Drug trafficking

AML/CFT Framework

Luxembourg has a strong framework for combating ML/TF, with a range of measures in place to prevent and detect suspicious transactions. The country’s Financial Intelligence Unit (FIU) is responsible for receiving and analyzing reports of suspicious transactions, while the Commission de Surveillance du Secteur Financier (CSSF) oversees the supervision of financial institutions.

  • Initiatives are still in their early stages, and it may take time to see significant results
  • Recent efforts to improve DNFBP supervision and asset management reform are showing promising signs

Risk Understanding and Coordination

Luxembourg has taken steps to increase its national ML/TF risk understanding, including:

  • Development of a National Risk Assessment (NRA)
  • Updates in 2018 and 2020
  • May 2022 TF Vertical Risk Assessment employed a sound methodology and came to reasonable conclusions

The report highlights the importance of coordination and policy setting in combating ML/TF. Luxembourg has made significant progress in this area, with:

  • Range of authorities and private sector representatives engaged in risk assessments and national action plans

Challenges and Recommendations

Despite its strengths, Luxembourg faces several challenges in combating ML/TF, including:

  • Prioritization of action items
  • Sustaining resources for AML/CFT efforts
  • Comprehensive and informative findings from risk assessments to be disseminated across all authorities and the private sector

In conclusion, while Luxembourg has made significant progress in combating ML/TF, there are still areas that require improvement. The country’s financial sector remains vulnerable to foreign predicate offences, and it is essential that the authorities continue to prioritize AML/CFT efforts to mitigate these risks.