Financial Crime World

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Luxembourg’s Financial Sector Stays Ahead of ML/TF Threats

The Grand Duchy of Luxembourg has maintained its strong reputation for effective anti-money laundering (AML) and counter-terrorism financing (CFT) measures, according to a recent assessment by the European Financial Intelligence Unit.

Robust AML/CFT Framework

Luxembourg’s AML/CFT framework has been praised for its robust technical compliance with international standards set by the Financial Action Task Force (FATF). The country’s risk assessments have identified foreign predicate offences, such as:

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

as the main money laundering (ML) threats.

Vulnerability of the Financial Sector

The assessment noted that Luxembourg’s financial sector is particularly vulnerable to ML and terrorist financing (TF), with banks, investment firms, private banking institutions, and real estate companies being targeted. However:

  • The country’s low crime rate
  • Limited presence of domestic organized crime

have reduced the threat level for domestically generated proceeds being laundered through Luxembourg.

Strong Coordination and Cooperation

The report highlighted Luxembourg’s strong coordination and cooperation on AML/CFT issues at both policy and operational levels. Risk assessments are extensively communicated to:

  • Financial institutions
  • Designated non-financial businesses and professions (DNFBPs)
  • Virtual asset service providers (VASPs)

in a proactive and consistent manner.

Challenges and Initiatives

Despite these strengths, the assessment noted that some initiatives aimed at improving the effectiveness of Luxembourg’s AML/CFT system have been:

  • Too recent
  • Require more time to become operational

The country has also faced challenges in prioritizing action items and ensuring their implementation, which has raised concerns about sustainability. To address these challenges, Luxembourg has taken steps such as:

  • Establishing an asset recovery office
  • Further harmonization of supervision

Conclusion

Overall, Luxembourg’s AML/CFT framework remains robust, with a strong understanding of its ML risks and effective coordination between authorities and the private sector. However, the country must continue to prioritize sustainability and ensure that its initiatives are fully implemented to maintain its strong reputation as an international financial hub.