Luxembourg Introduces Stricter Anti-Money Laundering Regulations for Financial Institutions

In an effort to strengthen its anti-money laundering (AML) and counter-terrorism financing (CFT) framework, Luxembourg has introduced new regulations that impose stricter requirements on financial institutions. These changes aim to prevent and detect suspicious transactions, while ensuring compliance with international standards.

New Requirements for Financial Institutions

The new regulations require financial institutions to implement robust internal systems for identifying and verifying customers, particularly in cases where there are no face-to-face interactions. This includes:

• Using electronic identification means
• Relevant trust services
• Other secure remote identification processes recognized by national authorities

Additionally, financial institutions must establish a “person responsible for compliance” (RR) and a “compliance officer” (RC). The RR must be a member of the board of directors or have equivalent authority, while the RC can delegate tasks to employees with sufficient experience and knowledge of Luxembourg’s legal and regulatory framework.

Enhanced Compliance Measures

The regulations also require financial institutions to:

• Adapt their internal systems without delay to the latest lists of persons, entities, or groups involved in transactions subject to restrictive measures
• Identify politically exposed persons (PEPs) during business relationships at least every six months
• Establish a process for transmitting copies of original supporting evidence received
• Implement measures to prevent the use of non-face-to-face relationships without sufficient safeguards

Outsourcing Arrangements and Agency Relationships

The new regulations provide further clarification on outsourcing arrangements and agency relationships. Key requirements include:

• Contracts must include detailed clauses specifying roles and responsibilities, as well as conditions relating to the transmission of information
• The responsibility for compliance remains with the board of directors of the financial institution

Effective Date and Scope

The new regulations come into effect immediately and apply to all financial institutions operating in Luxembourg, including:

• Investment firms
• Credit institutions
• Insurance companies
• Securities dealers

The Luxembourg Financial Intelligence Unit (FIU) will be responsible for monitoring compliance with the new regulations and reporting suspicious transactions to the relevant authorities.

Conclusion

The introduction of these stricter AML/CFT regulations is seen as a positive step towards enhancing financial stability and preventing illicit activities in Luxembourg’s financial sector. The measures are designed to strengthen the country’s anti-money laundering and counter-terrorism financing framework, while ensuring compliance with international standards.