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Inherent Risk Assessment for Money Laundering and Terrorist Financing in Luxembourg’s Corporate Sector

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Step 1: Inherent Risk Assessment

The inherent risk assessment is a critical step in identifying the vulnerabilities of Luxembourg’s corporate sector that could be exploited for money laundering (ML) and terrorist financing (TF) purposes.

Types of Inherent Risks

There are two types of inherent risks:

Corporate Risk

This assesses the inherent vulnerabilities in Luxembourg’s corporate environment that could be exploited for ML/TF purposes.

Entity-Type Specific Risk

This evaluates the specific legal characteristics of each type of legal person and legal arrangement that could hamper transparency and facilitate anonymity.

Inherent Vulnerabilities

The report identifies several inherent vulnerabilities, including:

Threats

These are considered in the Corporate risk assessment, combining threats with corporate inherent vulnerabilities to determine the level of corporate inherent risk.

Predicate Offences

The report assesses threats relevant to the misuse of Luxembourg’s corporate sector, such as money laundering, tax crimes, corruption and bribery, fraud and forgery, and terrorist financing.

Assessment Criteria

The report uses a scorecard to evaluate the inherent vulnerabilities and threat levels on a scale of “Very Low,” “Low,” “Medium,” “High,” and “Very High.”

Table 2: Inherent Vulnerability Scores and Outcomes

Table 3: Threat Levels

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