AML/CFT

CSSF AML/CFT risk assessment on TCSP activities

On 11 January 2022, the CSSF published a communication with the results of its risk assessment on money laundering and terrorist financing ("ML/TF") launched on 20 July 2020 regarding IFMs performing trust and company service provider (the "TCSP") activities on an ancillary or principal basis (the "Communication"). The TCSPs hold an important role as financial intermediaries by providing services relating to directorship and secretarial, domiciliation, trust and nominee shareholder of specialised PFS making them the link between financial institutions and clients, such as investment fund managers, or vehicles used for the pooling and transfer of ownership of assets.

Supervised CSSF professionals providing TCSP activities, interact with the above-mentioned structures when setting up, managing and/or administrating them. This leads to a financial sector particularly exposed to ML/FT risks to which IFMs should be alert. This CSSF analysis on TCSP aims to improve the understanding of the inherent risks of TCSP activities and the CSSF-monitored professional’s adherence to these recommendations as part of its supervisory activities (the “Risk Assessment”). The Risk Assessment is a valuable tool for all stakeholders to better understand the ML/TF risks associated with TCSP activities and the measures to combat them.

The CSSF has published key results through the Communication which include the following:

• TCSP services consist mostly in providing a corporate address and directorship services to entities directly linked to their investment fund management activity;
• AML/CFT controls applied by the IFMs to their TCSP activity are embedded in their general AML/CFT framework; and
• Generally there is a correct interpretation of the ML/TF risks associated with the TCSP business with appropriate mitigating measures, but there are some lacks as regards customer due diligence and ongoing monitoring.

CSSF reminder about the annual AML/CFT survey for RR and RC

On 7 February 2023, the CSSF issued a communication reminding that the annual online survey for 2022 will begin on 15 February 2023 (the “Communication”). The Communication follows a previous communication dated 7 December 2022 announcing the annual online survey for 2022 and aims to collect standardised key information on the AML/CFT risks faced by professionals supervised by the CSSF and the measures taken to reduce these risks as part of the CSSF’s ongoing assessment of AML/CFT risks in the Luxembourg financial sector.

The survey must be initiated and submitted through the CSSF's eDesk portal by the compliance officer in charge of controlling compliance with professional obligations (responsable du contrôle du respect des obligations professionnelles or RC), the person responsible for compliance with professional obligations (responsable du respect des obligations professionnelles or RR), an employee of the entity, or a third party. However, the responsibility for properly completing the survey lies with the RC or RR. Such persons are required to provide accurate data in this questionnaire, otherwise the CSSF may apply administrative measures or penalties. The CSSF expects answers to the survey to be submitted by 31 March 2023 at the latest.

AED updated its RAIFs guide on AML/CFT professional obligations

Last year, the Registration Duties, Estates and VAT Authority (Administration de l’enregistrement, des domaines et de la TVA – ”AED”) issued a guide with the minimum requirements for the RAIFs to comply with AML/CFT obligations (the “Guide”).

On 7 March 2023, the AED updated the Guide (the “Updated RAIF Guide”) with additional requirements and invites RAIFs to update their AML/CFT policy.

Some of the changes include amendments to:

• entering into a business relationship – the list of required documents now includes an RBO extract while the requirement to provide the Luxembourg identification number has been removed.
• enhanced customer due diligence – RAIF should reinforce their due diligence when the customer is listed on international financial sanctions lists or customers or beneficial owner(s) that have been placed on an international financial sanction list.
• ongoing due diligence – simultaneously with the type of due diligence required, the RAIF is required to exercise ongoing due diligence.
• guidelines for the appointment of the RR – clarification on the designation of the RR, which can be the board of directors acting as a collegial body or one of its members). The RR must be reachable for any contact by the Luxembourg AML/CFT competent authorities.
• guidelines for the appointment of the RC – clarification on the designation of the RC, who shall be mandated intuitu personae by the board of directors (or other governing body) of the RAIF. In principle, the RC must be available in Luxembourg for the accomplishment of their tasks. However, on an exceptional basis, and subject to the conditions defined below, it is acceptable for the RC to be located outside of Luxembourg, if the AIFM and the employees acting as RC are not domiciled in Luxembourg.
• sanction for non-respect of AML/CFT obligations – the Updated RAIF Guide has removed the highest sanction with the possibility to withdraw the business permit in case of non-respect of AML/CFT obligations and replace it by doubling the initial fine.