Luxembourg’s Financial Sector Takes Steps to Combat Money Laundering and Terrorist Financing

Luxembourg, a major international financial hub, has made significant progress in combating money laundering (ML) and terrorist financing (TF), according to a recent report.

Main Threats and Vulnerabilities

• Foreign predicate offenses have been identified as the main ML threat, including fraud, forgery, tax crimes, corruption, and drug trafficking.
• Luxembourg’s banking sector, investment firms, private banks, and real estate activities are particularly vulnerable to ML and TF.
• The country’s open borders within the Schengen area pose a risk of increased crime rates.

Measures Taken

Despite these challenges, Luxembourg has implemented various measures to strengthen its anti-money laundering (AML) and counter-terrorist financing (CFT) regime. These include:

• Strong technical compliance with international standards set by the Financial Action Task Force (FATF).
• Establishment of an asset recovery office.
• Improved supervision.
• Increased access to beneficial ownership information.

Areas for Improvement

However, there are areas where improvement is needed:

• Better communication with stakeholders, particularly regarding the prioritization of action items.
• The implementation of successive action plans has required diverting resources from non-AML/CFT priorities, raising concerns about sustainability.

Key Findings

• Luxembourg identified foreign predicate offenses as its main ML threat. • The country’s banking sector, investment firms, private banks, and real estate activities are vulnerable to ML and TF. • Luxembourg’s open borders within the Schengen area pose a risk of increased crime rates. • The country has implemented various measures to strengthen its AML/CFT regime. • Luxembourg’s authorities could benefit from better communication with stakeholders. • The implementation of successive action plans has raised concerns about sustainability.

Conclusion

Luxembourg’s financial sector has made significant progress in combating ML and TF. However, there are areas for improvement, particularly regarding communication and sustainability. The country’s authorities should continue to prioritize AML/CFT efforts and strengthen domestic coordination and cooperation to ensure the effectiveness of its anti-money laundering and counter-terrorist financing measures.

Recommendations

• Improve communication with stakeholders on priority action items. • Ensure sustainable implementation of AML/CFT initiatives. • Continue to strengthen domestic coordination and cooperation. • Enhance risk assessments and analysis to better understand ML/TF threats.