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Luxembourg Must Strengthen Efforts to Combat Terrorist Financing, Experts Warn

The Threat Remains Present

In the wake of recent terrorist attacks in neighboring countries, Luxembourg must remain vigilant against the threat of terrorist financing. Despite being deemed at low risk by the Financial Action Task Force (FATF), experts warn that the country’s financial sector remains vulnerable to abuse.

Challenges Identified

According to a recent FATF report, Luxembourg’s competent authorities face challenges in identifying the intended recipients of funds or linking them to terrorism. The report also highlighted the need for better understanding and monitoring of terrorism financing risks.

Experts’ Recommendations

Experts at PwC Luxembourg stress that raising awareness within companies is key to detecting suspicious activity and escalating it accordingly.

  • “Terrorist organisations need relatively little funds, and raising money isn’t their ultimate goal,” said Camélia Boudam, Manager, Anti-Financial Crime and Forensics at PwC Luxembourg. “As a result, market players may have to look harder to detect suspicious activity in a timely manner.”
  • The report also emphasized the importance of due diligence adjusted to the terrorism financing risk exposure.
    • Gathering financial and Know Your Customer (KYC) information properly
    • Running background checks are essential in identifying terrorist financing and the movement of terrorist funds through the financial system

Implementation of Risk-Based Approach

Luxembourg’s Ministry of Foreign Affairs is expected to implement a risk-based approach in its supervision of non-governmental organizations (NGOs) that engage in development and humanitarian projects abroad. However, experts warn that more needs to be done to strengthen the country’s efforts against terrorism financing.

  • “Terrorism Financing goes beyond money laundering as it can be from licit sources,” said Alessandro Casarotti, Director, Anti-Financial Crime and Forensics at PwC Luxembourg. “Therefore, assessing the destination of funds is critical.”

Recommendations for Companies

To combat this threat, experts recommend that companies:

  • Perform regular assessments and monitoring of their terrorism financing risks
  • Emphasize the importance of tailored training, policies, and procedures reviews to prevent terrorism financing risks

Expert Support Available

At PwC Luxembourg, subject matter experts are available to help companies increase their awareness and efficiency in mitigating risk exposure. For more information, visit the Anti-Financial Crime and Forensics page on our website.

Conclusion

While Luxembourg’s efforts against money laundering have been praised, more needs to be done to combat the threat of terrorist financing. By strengthening its prevention measures and raising awareness within companies, Luxembourg can reduce the risk of being exploited by terrorist organizations.