Financial Crime World

Luxembourg Tightens Grip on Terrorist Financing as FATF Urges Improvements in Detection Methods

Strengthening Anti-Money Laundering and Counter-Terrorist Financing Framework

Luxembourg is taking steps to enhance its anti-money laundering and counter-terrorist financing (AML/CFT) framework, following recommendations from the Financial Action Task Force (FATF). The country’s authorities have been praised for their good understanding of money laundering and terrorist financing risks, as well as effective use of financial intelligence and international cooperation.

Areas for Improvement

While Luxembourg has made significant progress in strengthening its AML/CFT framework, FATF has identified several areas that require attention:

  • Robust Risk-Based Supervision: Luxembourg needs to improve risk-based supervision of non-financial sectors such as real estate and notaries.
  • Financial Intelligence Unit (FIU): The FIU must ensure it can continue to produce high-quality financial intelligence products despite limited human resources.

Strengths of Luxembourg’s AML/CFT Framework

Luxembourg’s framework has been praised for:

  • Domestic Cooperation and Coordination: Authorities have timely access to beneficial ownership information and cooperate extensively with international counterparts.
  • Financial Intelligence Products: The FIU produces a wide range of financial intelligence products, disseminated to relevant stakeholders.

Recommendations for Improvement

FATF has urged Luxembourg to:

  • Proactively Identify and Investigate Terrorist Financing Activity: Take a more proactive approach to identifying and investigating terrorist financing activity.
  • Improve Asset Recovery Mechanisms: Develop and improve asset recovery mechanisms.
  • Communicate Risks Associated with International Financial Centre Status: Develop and communicate a clear understanding of the risks associated with its status as an international financial centre, to prevent exploitation for larger-scale terrorist financing.

Targeted Financial Sanctions Regime

Luxembourg is encouraged to:

  • Improve Targeted Financial Sanctions Regime: Remediate gaps in the targeted financial sanctions regime.
  • Increase Outreach Efforts to Non-Profit Organizations: Increase outreach efforts to non-profit organizations, many of which have a poor understanding of terrorist financing risks.

Conclusion

While Luxembourg has made significant progress in strengthening its AML/CFT framework, there is still much work to be done to ensure it remains effective in detecting and preventing money laundering and terrorist financing activities.