Luxembourg has a robust anti-money laundering and counter-terrorist financing (AML/CFT) framework with a good understanding of associated risks, but there are areas where improvements are needed, according to an assessment by the Financial Action Task Force (FATF).
Luxembourg, as a major international financial center, effectively utilizes financial intelligence and cooperates well with international partners. However, the country should prioritize enhancing money laundering investigations and prosecutions, asset recovery efforts, and the supervision of non-profit organizations and certain non-financial sectors.
The key findings and recommendations include:
- High-Risk Environment: Luxembourg’s international financial hub status with cross-border financial flows and high-risk products requires heightened vigilance. The main money laundering threat is foreign predicate offenses, including tax crimes, corruption, and fraud.
- Sector Focus: The banking, investment, and trust and company service sectors are particularly vulnerable to money laundering and terrorist financing. While the financial supervisor has a risk-based approach for banking and investment sectors, there’s room for improvement in supervising non-financial sectors like real estate and notaries.
- Cooperation and Coordination: Luxembourg excels in domestic cooperation and coordination. It has timely access to beneficial ownership information and cooperates actively with international counterparts.
- Financial Intelligence: Luxembourg’s Financial Intelligence Unit produces high-quality financial intelligence products but may need additional resources to handle increasing complexity.
- Risk-Based Approach: There’s a need for increased focus on sectors prone to significant money laundering risk, such as real estate and professionals offering trust and company services. Detection, investigation, and prosecution of complex money laundering cases should also be improved.
- Terrorist Financing: Luxembourg needs to communicate better to stakeholders how its status as an international financial center can be exploited for larger-scale terrorist financing. The oversight of the non-profit organizations sector should adopt a risk-based approach.
- Asset Recovery: Luxembourg should prioritize domestic asset recovery efforts while maintaining effective use of tools to freeze, seize, or confiscate assets related to crimes committed abroad.
- Terrorist Financing Investigations: While Luxembourg identifies and investigates terrorist financing activity, these efforts have not yet resulted in prosecutions or convictions.
In summary, while Luxembourg has a strong foundation in its AML/CFT framework, addressing these recommendations will help further strengthen its efforts to combat money laundering and terrorist financing.
By FCCT Editorial Team