Financial Crime World

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Luxembourg’s Financial Regulator Warns of Terrorist Financing Detection Shortcomings

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The Commission de Surveillance du Secteur Financier (CSSF), Luxembourg’s financial regulator, has identified several areas that require attention to prevent terrorist financing in the country. Despite consistent focus on these areas in previous years, the CSSF is likely to continue addressing them in the future.

Key Concerns

According to the CSSF’s annual report, two major concerns persist:

  • Lack of adequate due diligence: The regulator has emphasized the need for thorough due diligence on delegates and assets.
  • Inadequate sanction screening measures: The CSSF has criticized the industry’s controls, highlighting the need for more effective measures.

International Factors

The Financial Action Task Force (FATF) recently evaluated Luxembourg’s measures to combat money laundering and terrorist financing. The evaluation identified several weaknesses that must be addressed.

Focus Areas

To prevent terrorist financing, professionals in the investment sector are advised to prioritize the following areas:

  • Enhancing supervision of non-profit organizations
  • Implementing risk-based supervision of non-financial sectors (trust and company services, real estate, notaries)
  • Conducting thorough due diligence on delegates and assets, including manual and automated screening procedures
  • Implementing clearly described processes for initial and ongoing sanction-List name screening
  • Ensuring preventive measures are sufficient to deter the financing of weapons of mass destruction

Guided by Past Observations

The CSSF’s focus areas are guided by past regulatory observations and international evaluations. Professionals must remain aware of these areas and take steps to address any shortcomings in their own operations.

Conclusion

Luxembourg’s financial regulator is urging professionals to prioritize terrorist financing detection methods to prevent the misuse of the financial system for illicit purposes. By addressing these concerns, professionals can help maintain a secure and reliable financial environment.