Luxembourg

New Documents

The Commission de Surveillance du Secteur Financier published a report following a thematic review of the use of artificial intelligence and machine learning in the financial sector based on a survey sent to 148 supervised institutions.

The Luxembourg Finance Ministry issued a general authorization concerning restrictive measures relating to Russia’s invasion of Ukraine.

Enforcement Actions

The Commission de Surveillance du Secteur Financier imposed a €1,560,000 administrative penalty on the Luxembourg-based bank after a September 2019 inspection uncovered weaknesses in its anti-money laundering and counterterrorist financing framework.

The Commission de Surveillance du Secteur Financier issued 11 fines totaling €87,500 and one reprimand against Luxembourg-based financial institutions for failing to submit required online questionnaires concerning anti-money laundering and counterterrorist financing controls for 2021.


Important Facts

  • The U.S. Department of State labels Luxembourg as a jurisdiction of primary concern. Despite being the second-smallest member of the EU, Luxembourg is one of the largest financial centers in the world. It also operates as an offshore financial center. The majority of banks registered in Luxembourg are foreign subsidiaries of banks in Germany, Belgium, France, Italy and Switzerland. While Luxembourg is not a major hub for illicit narcotics distribution, the size and sophistication of its financial sector create opportunities for money laundering, tax evasion and other financial crimes. Hundreds of well-known multinationals have secured deals in Luxembourg that allow them to legally slash their taxes in their home countries. In some cases the Luxembourg subsidiaries of multinationals, that on paper handle hundreds of millions of dollars in business, maintain only a token presence or a simple front address. The Luxembourg Freeport is a highly secure warehouse adjacent to Luxembourg Findel Airport. It offers a variety of tax advantages because the goods warehoused are technically in transit. The Freeport is often used to store art and other valuable items without having to pay customs or sales tax. The services and confidentiality make the Freeport similar to an offshore financial center. With the Law of 24 July 2015, the licensed operators of the Luxembourg Freeport are now subject to the same know-your-customer obligations that apply to other covered entities. The licensed operators of the Luxembourg Freeport are supervised by the Luxembourg Administration for Indirect Taxation for their anti-money laundering and counterterrorist financing obligations.
  • KYC covered entities:Banks and payment institutions; investment, tax, and economic advisers; brokers, custodians, and underwriters of financial instruments; commission agents, private portfolio managers, and market makers; managers and distributors of units/shares in undertakings for collective investments (UCIs); financial intermediation firms, registrar agents, management companies, trust and company service providers, and operators of a regulated market authorized in Luxembourg; foreign exchange cash operations; debt recovery and lending operations; pension funds and mutual savings fund administrators; corporate domiciliation agents, company formation and management services, client communication agents, and financial sector administrative agents; primary and secondary financial sector IT systems and communication network operators; insurance brokers and providers; management companies for reinsurance undertakings or insurance captives, run-off management companies, actuarial service providers, insurance portfolio managers, governance service providers, and insurance claim handlers; auditors, accountants, notaries, and lawyers; casinos and gaming establishments; real estate agents; high-value goods dealers; and the licensed operators of the Luxembourg Freeport
  • STR covered entities:Banks and payment institutions; investment, tax, and economic advisers; brokers, custodians, and underwriters of financial instruments; commission agents, private portfolio managers, and market makers; managers and distributors of units/shares in UCIs; financial intermediation firms, registrar agents, management companies, trust and company service providers, and operators of a regulated market authorized in Luxembourg; foreign exchange cash operations; debt recovery and lending operations; pension funds and mutual savings fund administrators; corporate domiciliation agents, company formation and management services, client communication agents, and financial sector administrative agents; primary and secondary financial sector IT systems and communication network operators; insurance brokers and providers; management companies for reinsurance undertakings or insurance captives, run-off management companies, actuarial service providers, insurance portfolio managers, governance service providers, and insurance claim handlers; auditors, accountants, notaries, and lawyers; casinos and gaming establishments; real estate agents; high-value goods dealers; and the licensed operators of the Luxembourg Freeport
  • Enhanced due diligence procedures for PEPs:Foreign:YesDomestic:No
  • Money laundering criminal Prosecutions/Convictions: Prosecutions:486: (Jan.1 – Nov. 30, 2015; Convictions:257: Jan. 1 – Nov. 30, 2015
-Source: 2016 International Narcotics Control Strategy Report (INCSR)

Rankings

FATF i

Technical Effectiveness
Compliant : 1 High :
Largely Compliant : 9 Substantial :
Partially Compliant : 30 Moderate :
Non-Compliant : 9 Low :

BASEL i

Rank : 92/141
Score : 4.74/10

TRANSPARENCY INTERNATIONAL i

Rank : 9/179
Score : 80/100

Tax Justice Network i

Rank : 6/133
Score : 55/100