Luxembourg Urged to Boost AML/CFT Efforts in Key Sectors and Investigations
The Financial Action Task Force (FATF) has praised Luxembourg’s anti-money laundering and counter-terrorist financing (AML/CFT) framework, but the country is urged to focus more on investigating and prosecuting money laundering cases, improving supervision of non-profit organizations and certain non-financial sectors, and enhancing domestic asset recovery.
A Major International Financial Hub
As a major international financial hub, Luxembourg faces significant risks from money laundering and terrorist financing. The country’s financial supervisor, Commission de Surveillance du Secteur Financier (CSSF), has prioritized the banking and investment sectors, using a risk-based approach to supervision. However, more work is needed in the non-financial sectors, such as:
- Trust and company services
- Real estate
- Notaries
Key Strengths and Areas for Improvement
The FATF report highlighted Luxembourg’s robust domestic cooperation and coordination as a key strength, with authorities having timely access to beneficial ownership information and cooperating extensively with international counterparts. The country’s Financial Intelligence Unit (CRF-FIU) produces high-quality financial intelligence products, but needs to ensure it can continue to do so given its level of human resources and increasingly complex role.
However, Luxembourg is urged to focus on sectors exposed to significant money laundering risk, such as:
- Real estate
- Professionals from the non-financial sector offering trust and company services
The country also needs to improve detection, investigation, and prosecution of more complex money laundering cases.
Addressing Terrorist Financing Risks
While some Luxembourg authorities demonstrate a good understanding of terrorist financing risk, the FATF report highlights that the country should further develop and communicate how its status as an international financial centre can be exploited for larger-scale terrorist financing. Luxembourg is also urged to take a risk-based approach to oversight of non-profit organizations, including through outreach to increase this sector’s poor understanding of terrorist financing risk.
Domestic Asset Recovery
Domestic asset recovery is another area where Luxembourg needs to improve, although the country makes effective use of tools to freeze, seize or confiscate assets involving crimes committed abroad. The FATF report also recommends that Luxembourg remedy gaps in its targeted financial sanctions regime and enhance its investigation and prosecution of terrorist financing cases.
Conclusion
Overall, while Luxembourg’s AML/CFT framework is solid, the country must take concrete steps to address these weaknesses and maintain its position as a responsible international financial centre.