Luxembourg's measures to combat money laundering and terrorist financing

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English

Country

Luxembourg

Mutual Evaluation Luxembourg - 2023

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Luxembourg MER 2023.pdf
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Paris, 27 September 2023 - The Grand-Duchy of Luxembourg (“Luxembourg”) has a solid anti-money laundering and counter-terrorist financing (AML/CFT) framework and a good understanding of its money laundering and terrorist financing risks. Authorities make good use of financial intelligence and co-operate effectively with international counterparts. However, Luxembourg needs to focus more on money laundering investigations and prosecutions, asset recovery and supervision of non-profit organisations and some non-financial sectors, according to FATF’s assessment of the country’s measures to tackle money laundering and terrorist financing.

Luxembourg is a large international financial hub, with significant cross-border financial flows, international clientele and high-risk products and services, particularly in the banking and investment sectors.  The country has identified foreign predicate offences as its main money laundering threat, including tax crimes, corruption and fraud.

Luxembourg has large and diverse financial and non-financial sectors. The banking, investment and trust and company service sectors are among the most vulnerable to money laundering and terrorist financing. Luxembourg’s financial supervisor (Commission de Surveillance du Secteur Financier, CSSF) has focused its priorities and human resources on the banking and investment sectors and is using a multipronged risk-based approach of off-site supervision and monitoring through on-site inspections. However, risk-based supervision of the non-financial sectors, such as trust and company services, real estate and notaries, is in the early stages and further work needs to be done. 

The key strength of the Luxembourg system is the robust domestic co-operation and co-ordination. Authorities also have timely access to beneficial ownership information and co-operate extensively and constructively with international counterparts. 

Luxembourg’s Financial Intelligence Unit, CRF-FIU, produces and disseminates a wide range of high-quality financial intelligence products but needs to ensure that it can continue to do so given its level of human resources and increasingly complex role.

Luxembourg should focus more on sectors that are exposed to significant money laundering risk such as real estate and professionals from the non-financial sector offering trust and company services. Given the country’s risk profile, authorities should also improve the detection, investigation, and prosecution of more complex money laundering cases. Although some Luxembourg authorities demonstrate a good understanding of terrorist financing risk, the FATF mutual evaluation highlights that the country should further develop and communicate to public and private sector stakeholders how the country’s status as an international financial centre can be exploited for larger scale terrorist financing. Luxembourg should take a risk-based approach to its oversight of the non-profit organisations sector, including through outreach to increase this sector’s poor understanding of terrorist financing risk.

Luxembourg needs to focus more on domestic asset recovery. However, when responding to requests by foreign counterparts it makes effective use of tools to freeze, seize or confiscate assets involving crimes committed abroad. While the country generally implements targeted financial sanctions for terrorist financing within one day, measures to remedy gaps in the targeted financial sanctions regime, several of which were only recently put into place, require further development to demonstrate whether they are effective.

Luxembourg proactively identifies and investigates terrorist financing activity alongside terrorism related investigations but, due to mitigating measures and the country’s risk profile, these investigations have not yet led to prosecutions or convictions.

Executive Summary MER Luxembourg - 2023

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Luxembourg-MER-Executive-Summary-2023.pdf
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Ratings

Effectiveness

Ratings that reflect the extent to which a country's measures are effective. The assessment is conducted on the basis of 11 immediate outcomes, which represent key goals that an effective AML/CFT system should achieve.

Ratings that reflect the extent to which a country's measures are effective. The assessment is conducted on the basis of 11 immediate outcomes, which represent key goals that an effective AML/CFT system should achieve.

Luxembourg Mutual Evaluation 2023

IO1
SE
IO2
SE
IO3
ME
IO4
ME
IO5
SE
IO6
SE
IO7
ME
IO8
ME
IO9
SE
IO10
ME
IO11
ME

HE = high level of effectiveness   |   SE = substantial level of effectiveness    |   ME = moderate level of effectiveness   |   LE = low level of effectiveness

Technical Compliance

Ratings which reflect the extent to which a country has implemented the technical requirements of the FATF Recommendations.

Luxembourg Mutual Evaluation 2023

R.1 - Assessing risk & applying risk-based approach
C
R.2 - National cooperation and coordination
C
R.3 - Money laundering offence
C
R.4 - Confiscation and provisional measures
LC
R.5 - Terrorist financing offence
C
R.6 - Targeted financial sanctions related to terrorism & terrorist financing
LC
R.7 - Targeted financial sanctions related to proliferation
LC
R.8 - Non-profit organisations
PC
R.9 - Financial institution secrecy laws
C
R.10 - Customer due diligence
C
R.11 - Record keeping
C
R.12 - Politically exposed persons
C
R.13 - Correspondent banking
C
R.14 - Money or value transfer services
C
R.15 - New technologies
LC
R.16 - Wire transfers
C
R.17 - Reliance on third parties
C
R.18 - Internal controls and foreign branches and subsidiaries
C
R.19 - Higher-risk countries
C
R.20 - Reporting of suspicious transactions
C
R.21 - Tipping-off and confidentiality
C
R.22 - DNFBPs: Customer due diligence
C
R.23 - DNFBPs: Other measures
C
R.24 - Transparency and beneficial ownership of legal persons
LC
R.25 - Transparency and beneficial ownership of legal arrangements
C
R.26 - Regulation and supervision of financial institutions
C
R.27 - Powers of supervisors
C
R.28 - Regulation and supervision of DNFBPs
C
R.29 - Financial intelligence units
C
R.30 - Responsibilities of law enforcement and investigative authorities
LC
R.31 - Powers of law enforcement and investigative authorities
C
R.32 - Cash couriers
LC
R.33 - Statistics
LC
R.34 - Guidance and feedback
C
R.35- Sanctions
LC
R.36 - International instruments
LC
R.37 - Mutual legal assistance
C
R.38 - Mutual legal assistance: freezing and confiscation
C
R.39 - Extradition
C
R.40 - Other forms of international cooperation
LC

C = compliant   |   LC = largely compliant     |   PC = partially compliant   |   NC = non-compliant

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