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Looking back on the 2024 CSSF AML/CFT Conference for Investment Firms

Published on 14 May 2024 Email this Share this on LinkedIn Share this on Facebook Communiqué Looking back on the 2024 CSSF AML/CFT Conference for Investment Firms In order to foster interaction with the investment firms under its supervision, the Commission de Surveillance du Secteur Financier (CSSF) held an online conference on 23 April 2024 highlighting the key issues on AML/CFT for the sector. Representatives of the Luxembourg Ministry of Justice and the Luxembourg Financial Investigations Unit (FIU) were amongst the speakers. The speakers gave feedback and clarifications on the following topics: Key take-aways from AML/CFT investment firms’ supervision. Results of the FATF’s Mutual Evaluation 2023. Findings, typologies and best practices by the FIU. 14 May 2024 2024 AML/CFT Conference Dedicated to Investment Firms of the Financial Sector CSSF Studies and reports PDF (3.31Mb) Main topic: Financial crime Relevant for Investment firms 2024 AML/CFT Conference Dedicated to Investment Firms of the Financial Sector 23 April 2024 Agenda Introduction Key take-aways from AML/CFT investment firms’ supervision Results of FATF’s Mutual Evaluation 2023 Findings, typologies and best practices by the FIU 23 April 2024 AML/CFT conference 2 Introduction Claude Marx Director General, CSSF Key take-aways from AML/CFT investment firms’ supervision Cyrille TONNELET, CSSF Liz MEYER, CSSF 23 April 2024 AML/CFT conference 4 Investment firms sector overview Main Activity (2020-2022)** 70 As of 31 December 2023*: 92 investment firms, including 7 EU branches supervised by the CSSF 1.830 employees 64 63 64 60 50 2020 2021 40 2022 30 Total balance sheet: 1.06 20 bn EUR 10 7 10 9 8 7 6 7 7 10 5 6 8 3 8 2 0 Reception and Execution of Portfolio Investment transmission of orders on behalf management advice (Art. 24-5 orders (Art. 24-1 of clients (Art. (Art. 24-4 LFS) LFS) LFS) 24-2 LFS) *source: quarterly reporting 2023 23 April 2024 AML/CFT conference Other No Data Available **source: survey on financial crime 2020-2022 5 AML/CFT supervision Main objectives Assess whether investment firms have: • defined their ML/TF risk appetite and risk strategy; their inherent ML/TF risks • identified (customers, products & services, distribution channels, others…); systems and controls • implemented appropriate to the nature, scale and complexities of their business; • systems and controls in place proportionate to their inherent risks and commensurate to their risk appetite. 23 April 2024 AML/CFT conference 6 AML/CFT supervisory tools Welcome visits Face to face meetings with the Chief Compliance Officer Review of annual closing documents Annual survey on financial crime AML/CFT onsite inspections AML/CFT Colleges Cooperation with national and foreign authorities Offsite investigations (thematic analysis, adverse media, whistleblowing, etc.) 23 April 2024 AML/CFT conference 7 Main findings & best practices identified in the following areas: AML/CFT risk self-assessment Customer risk assessment Name screening process Transaction monitoring process Cooperation with the authorities 23 April 2024 AML/CFT conference 8 AML/CFT risk self- assessment – main findings Inherent risk -2022 60% Concern on the adequacy of the inherent risk at the investment firm level 50% 40% 30% 20% 10% 0% Low Medium-Low CSSF risk assessment 23 April 2024 Medium-High High IFs' risk assessment AML/CFT conference 9 AML/CFT risk self-assessment ML/FT Sub-sector risk assessment Private Banking

(2023)ML/FT Sub-sector risk assessment for trust and corporate service providers (TCSP)
(2020)23 April 2024 AML/CFT conference 10 AML/CFT risk self- assessment – main findings Insufficient description of the mitigation measures No regular review Insufficient focus on the TF aspect 23 April 2024 AML/CFT conference 11 AML/CFT risk self-assessment Best practices Legal basis: Article 2-2 of the AML Law and Article 4 of the CSSF Regulation N° 12-02 Use of public sources: national risk assessment, sub-sector private banking risk assessment, sub-sector TCSP risk assessment, etc. CSSF Circulars 11/519 and 11/529 Regular updates in order to take significant new developments into account Do not forget the CFT aspect 23 April 2024 AML/CFT conference 12 Customer risk assessment – main findings Not all risk factors mentioned in Article 3
(2a)of the AML/CFT Law are covered (customers, countries, products, services, transactions, delivery channel) Inadequate due diligence measures, particularly for clients linked to high risk countries or PEPs Inappropriate frequency of the periodic review of client files Absence of or insufficient documented analysis 23 April 2024 AML/CFT conference 13 Customer risk assessment Best practices Consider at least all risk factors provided by the AML/CFT Law Identify all ML/FT risk factors CSSF Circular 21/782, completed by CSSF Circular 23/842 « Adoption of the revised guidelines, by EBA, on money laundering and terrorist financing risk factors » Apply adequate due diligence measures Ensure risk rating and due diligence measures are appropriate Review client timeframe Formalise the analysis files within an appropriate Formalise/ document the analysis Do not forget the CFT 23 April 2024 AML/CFT conference 14 Name screening process – main findings Incomplete client database Delay in treatment of hits No 4-eyes principle on analysis of hits Insufficient formalisation of analysis No controls performed on updating TFS lists immediately in screening tools 23 April 2024 AML/CFT conference 15 Name screening process Ensure client database is complete (Art. 39
(2)of the CSSF Regulation N°12-02) Screen daily or at least at publication of TFS lists (Art. 33
(1)and 39
(1)of the CSSF Regulation N°1202) Complete client database Treat hits upon receipt (Art. 33 of the CSSF Regulation N°12-02) 4-eyes principle Screening at least at publication of TFS lists Apply 4-eyes principle on encoding in database and treatment of hits (false and true) (Art. 39 of the CSSF Regulation N°12-02) Formalise/ document analysis (Article 39
(3)of the CSSF Regulation N°12-02) Perform regular controls on the correct functioning of the screening tool (Art. 33
(3)of the CSSF Regulation N°12-02) Formalise analysis 23 April 2024 Best practices AML/CFT conference 16 Transaction monitoring process – main findings Absence of transaction monitoring Source of wealth and source of funds not sufficiently established No clear understanding of the purpose and rationale of the business relationship Staff not performing recognising red flags coherence checks or Absence of 4-eyes principle No or insufficient formalisation/ documentation of analysis 23 April 2024 AML/CFT conference 17 Transaction monitoring process Best practices Perform your own transaction monitoring Develop critical thinking Provide AML/CFT training to the staff and management (Art. 4
(2)of the AML/CFT Law & Art. 46 of the CSSF Regulation N°12-02) Tailormade training Critical thinking Responsible for transaction monitoring 4-eyes principle 23 April 2024 Formalise analysis AML/CFT conference Apply 4-eyes principle on transaction monitoring (Art. 39 of the CSSF Regulation N°12-02) Formalise/ document analysis (Art. 39 of the CSSF Regulation N°12-02) 18 Cooperation with the authorities – main findings Absence of or delayed report to the Financial Intelligence Unit (FIU) or Ministry of Finance (MoF) Reports driven by adverse media before analysing if there are grounds for suspicion. Poor quality of the reports sent to the FIU No awareness of the obligation to report to the Ministry of Finance regarding TFS measures 23 April 2024 AML/CFT conference 19 Cooperation with the authorities Contact Ministry of Finance (MoF): “All investment firms met were unable to identify the correct authority to notify following an asset freeze under the TFS framework, indicating a deficiency relating to communication about TFS obligations to this particular sector.” (FATF, Luxembourg MER, September 2023)  by post mail to: Ministère des Finances, 3 Rue de la Congrégation, L-1352 Luxembourg; or  by email to sanctions@fi.etat.lu For further information regarding TFS, please refer to the MoF’s website: International financial sanctions - Ministry of Finance // The Luxembourg Government (gouvernement.lu) 23 April 2024 AML/CFT conference 20 Cooperation with the authorities Best practices Identify the correct authority to notify FIU – Cellule de renseignement financier (CRF) Ministère des Finances (MoF) Article 5
(1)of the Law of 12 November 2004 Article 6 of the Law of 19 December 2020 Article 8 of the Grand-ducal Regulation of 1 February 2010 Articles 33 and 39 of the CSSF Regulation N°12-02 Chapter 6 of the CSSF Regulation N° 12-02, especially Article 48
(1)and
(2)Article 5 of the Law of 20 July 2022 (adding sanction avoidance as predicate offence in Luxembourg) 23 April 2024 AML/CFT conference 21 Cooperation with the authorities Best practices Report to be sent to the FIU/ MoF without delay Apply EDD to the client in case of a report Formalise/ document the analysis (Art. 48
(2)of the CSSF Regulation N°12-02) Provide training to the 1st line of defense (Art. 46 of the CSSF Regulation N°12-02) 23 April 2024 AML/CFT conference 22 Thank you for your attention! Any questions to be sent to amlei@cssf.lu 23 April 2024 Results of FATF’s Mutual Evaluation 2023 2024 AML/CFT Conference – Investment firms 23 April 2024 Mr. Jérémie Ogé – Deputy Director Direction LBC/FT Agenda Introduction II. Summary of the report I.
  1. Technical compliance ratings
  2. Effectiveness ratings
  3. Positive points
  4. Areas for improvement III. Investment firms
  5. Understanding of risks and obligations
  6. Risk mitigating measures
  7. CDD, record-keeping, EDD
  8. Targeted financial sanctions
  9. Reporting obligations to the FIU IV. Recommendations V. Implementation and next steps 25 I. Introduction 26 Introduction (1/2)  FATF mutual evaluations have two components: • Technical compliance : ‒ 40 recommendations ‒ Technical annex to the report • Effectiveness: ‒ Are the AML/CFT systems are operational and producing positive effects? ‒ Eleven objectives (Immediate Outcomes) ‒ Core of the report 27 Introduction (2/2) 4th assessment round of Luxembourg by the FATF • Process ran from 2019 to 2023 • Process lengthened due to the COVID-19 pandemic • On-site visit took in November 2022  Period assessed: 1 January 2017 to November 2022  Five assessors  Report discussed and adopted by the Plenary meeting in June 2023  Publication of the MER: 28 September 2023  28 II. Summary of the report 29 Summary of the report (1/6)
  10. Technical compliance ratings R1 ASSESSING RISKS AND APPLYING A RISK-BASED APPROACH R2 NATIONAL COOPERATION AND COORDINATION R3 MONEY LAUNDERING OFFENCE R4 CONFISCATION AND PROVISIONAL MEASURES R11 RECORD KEEPING R12 POLITICALLY EXPOSED PERSONS (PEPS) R13 CORRESPON DENT BANKING R14 MONEY OR VALUE TRANSFER SERVICES (MVTS) R15 NEW TECHNOLOGIES R25 TRANSPARENC Y AND BENEFICIAL OWNERSHIP OF LEGAL ARRANGEMENT S R26 REGULATION & SUPERVISION OF FINANCIAL INSTITUTIONS R35 SANCTIONS R36 INTERNATIONAL INSTRUMENTS R21 TIPPING-OFF & CONFIDENTIALI TY R22 CUSTOMER DUE DILIGENCE (DNFBPs) R23 OTHER MEASURES (DNFBPs) R24 TRANSPARENC Y AND BENEFICIAL OWNERSHIP OF LEGAL PERSONS R31 POWERS OF LAW ENFORCEMENT AND INVESTIGATIVE AUTHORITIES R32 CASH COURIERS R33 STATISTICS R34 GUIDANCE AND FEEDBACK R5 TERRORIST FINANCING OFFENCE R6 TFS RELATED TO TERRORISM & TF R16 WIRE TRANSFERS R7 TFS RELATED TO PROLIFERATIO N R8 NON-PROFIT ORGANISATIO NS (NPOS) R17 RELIANCE ON THIRD PARTIES R18 INTERNAL CONTROLS & FOREIGN BRANCHES & SUBSIDIARIES R9 FINANCIAL INSTITUTION SECRECY LAWS R10 CUSTOMER DUE DILIGENCE (CDD) R19 HIGHER RISK COUNTRIES R20 REPORTING OF SUSPICIOUS TRANSACTIONS Compliant Largely compliant Partially compliant R27 POWERS OF SUPERVISORS R28 REGULATION AND SUPERVISION OF DNFBPs R29 FINANCIAL INTELLIGENC E UNITS (FIU) R30 RESPONSIBILITIE S OF LAW ENFORCEMENT AND INVESTIGATIVE AUTHORITIES R37 MUTUAL LEGAL ASSISTANCE (MLA) R38 MLA: FREEZING & CONFISCATIO N R39 EXTRADITION R40 OTHER FORMS OF INTERNATIONAL CO-OPERATION Non-compliant Not-applicable 30 Summary of the report (2/6)
  11. Effectiveness ratings Immediate Outcomes MER Ratings 1 Risk, Policy and Co-ordination Substantial 2 International Co-operation Substantial 3 Supervision Moderate 4 Preventive Measures Moderate 5 Legal Persons and Arrangements Substantial 6 Financial Intelligence ML/TF Substantial 7 ML Investigation and Prosecution Moderate 8 Confiscation Moderate 9 TF Investigation and Prosecution Substantial 10 TF Preventive Measures and Financial Sanctions Moderate 11 PF Financial Sanctions Moderate 31 Summary of the report (3/6)
  12. Positive points  Good understanding of the ML risks  Good national cooperation and coordination mechanisms  Key role played by the Financial Intelligence Unit (FIU) in producing and disseminating financial intelligence 32 Summary of the report (4/6)
  13. Positive points  Proactivity in TF investigations and excellent international cooperation with counterpart authorities in neighboring countries  Strong understanding of ML risks by financial institutions, good knowledge of their obligations and implementation of appropriate mitigation measures  Recognition of the efforts made by Luxembourg in terms of transparency of legal persons and legal arrangements 33 Summary of the report (5/6)
  14. Areas for improvement  Better communicate TF risk stemming from Luxembourg’s status as an international financial centre  Lack of a risk-based approach at the level of the NPO supervisor and poor understanding of TF risk by the sector  Concerns about the quantity of human resources from different authorities including the FIU, investigative and judicial authorities and DNFBP supervisors 34 Summary of the report (6/6)
  15. Areas for improvement  Improve understanding and application of AML/CFT and TFS obligations by the private sector (especially non-financial sector)  Provide the FIU with STRs containing a certain level of analysis (not just adverse media reports)  Some of the penalties and remedial measures imposed are inadequate or insufficient, particularly those imposed by DNFBP supervisors and with regard to publication requirements in the RBE. 35 III. Investment firms 36
  16. Understanding of ML/FT risks and AML/CFT obligations      FIs = good understanding ML risks but TF risks varied. FIs = various risk assessments (SSRA, NRA and VRA) : useful guides for developing their own risk assessments. FIs = reduced their appetite for risk following Panama Papers, increased regulatory requirements and inclusion of tax offences as primary ML offences. FIs = refusing potential customers if not necessary comfort on customer's tax compliance, origin of funds and wealth, inconsistencies on BOs. Investment firms = Main ML exposure in line with NRA/SRAs = high risks stemming from tax crimes, corruption (particularly PEPs as clients), fraud, and private banking 37
  17. Understanding of ML/FT risks and AML/CFT obligations  Main negative point = weaker understanding of TF risks in relation to TF levels stemming from international organisations using Luxembourg’s IFC status.  A more in-depth TF risk understanding by FIs is beginning to develop following the publication of the 2022 TF VRA (in May 2022). However, it does not give the necessary details to obliged entities to understand the TF typologies and methods within their business activities, services and products.  Understanding of AML/CFT obligations is strong for FIs. One exception = investment firms : don’t know the Authority to notify in case of positive TFS hit. 38
  18. Risk mitigation measures  A vast majority of FIs = apply appropriate mitigating measures to manage ML/TF risks and have measures commensurate with their risks.  Most FIs = do not apply simplified measures to low-risk situations, but apply EDD to a variety of higher risk situations = cautious approach 39
  19. CDD, record-keeping and EDD Effective CDD and record-keeping measures in place. Where gaps = mostly minor and non-systemic.  FIs = effective processes in place for onboarding customers and conducting CDD.  EDD = no shortcomings (PEPs, correspondent services, New technologies, Higher-risk countries) except for TFS  40
  20. TF-targeted financial sanctions  FIs = aware of the obligation to freeze without delay. Many use automated tools to screen UN sanctions regimes.  Screening enables the identification of sanctioned individuals within 24 hours of designation. In the event of a "hit", a declaration is made to the Ministry of Finance.  However, some players did not know to which authority these reports should be addressed. 41
  21. Reporting obligations to the FIU 99% of STRs = via goAML. FIs = good understanding of their STR obligations.  Large proportion of STRs = driven by adverse media hits. Not all professionals conduct proper analyse to establish if there are grounds for suspicion before filing the STR.  Quality and relevancy of TF-related reports submitted = a concern. Low level of TF reporting. Not clear whether there are reports that include the aspect of financing or if they are all related to terrorism itself: need for the private sector to further develop its TF risk understanding.  Increase in STRs in 2017 following the introduction of tax offences as ML's primary offence.  42 IV. Recommendations 43 Recommendations (1/2)  Improve understanding of foreign TF risk, methods and exposure, arising from Luxembourg's exposure as an international financial centre with significant crossborder activities and the fact that terrorist funds may be utilized, parked or in transit.  Set up in-house training courses and take advantage of training courses where authorities are invited, and communicate on the types and risks associated with TF. 44 Recommendations (2/2)  Register with the FIU in GoAML ( www.justice.public.lu > Organisation de la Justice > CRF > Inscription d’un nouveau déclarant).  Improve the quality of STRs (analyse and report suspicious activities and transactions). Better analysis of adverse media reports with corroborating indicators. 45 V. Implementation and next steps 46 Implementation and next steps After the adoption of the mutual evaluation report, assessed countries enter the follow-up process.  Given Luxembourg's good results, the country has been placed under regular follow-up (default follow-up mechanism).  Luxembourg will have to send the FATF a progress report three years after the adoption of the mutual evaluation report.  Luxembourg is continuing its process of constant improvement of its AML/CFT system by responding to the MER recommended actions.  The 5th round of mutual evaluations begins in
  22.  47 Questions ? 48 Thank you for your attention! 49 CSSF CRF’S STATISTICS, ML/TF TYPOLOGIES, INDICATORS AND BEST PRACTICES FOR INVESTMENT FIRMS 23 APRIL 2024 LUXEMBOURG FIU (CRF) ANOUK DUMONT – ESMAN KURUM AGENDA ABOUT US 2023 KEY FIGURES FOCUS ON INVESTMENT FIRMS ML/TF TRENDS - INVESTMENT FIRMS CASE STUDY BEST PRACTICE GUIDANCE Q&A ABOUT US ORGANIZATION, MISSIONS, RESSOURCES AND ABILITIES OF THE FIU Luxembourg FIU - Cellule de Renseignement Financier (CRF) In a nutshell A judiciary type of FIU Total number of employees: 45 A multidisciplinary team Operationally independent and autonomous Under the administrative supervision of the Prosecutor General’s Office of the Grand-Duchy of Luxembourg A team made up of magistrates, IT and data analysis experts, operational and strategic analysts specialized in a wide range of areas such as terrorist financing, tax offences, virtual assets and cybercrime, investment funds, corruption, legal structures and complex money-laundering schemes. FATF MER for Luxembourg (September 2023) Luxembourg has a solid model for combating money laundering and the financing of terrorism (AML/CFT), with a good understanding of the money laundering and terrorist financing risks it faces. Cooperation with professionals Obligation for professionals to report suspicious transactions and activities to the FIU :  Promptly  On their own initiative  When they know, suspect or have reasonable grounds to suspect that money laundering, an associated predicate offence or terrorist financing is being committed or has been committed or attempted, in particular in consideration of the person concerned, its development, the origin of the funds, the purpose, nature and procedure of the operation  The report must be accompanied by all supporting information and documents having prompted the report  No legal qualification of the facts is required. On-request cooperation Spontaneous cooperation Spontaneous cooperation On-request cooperation Obligation to respond to FIU requests :  Without delay  With all the requested information  Including the submission of the documents 100% digital 2023 KEY FIGURES EVOLUTION OF THE TOTAL NUMBER OF FILED REPORTS AND REQUESTS FOR INFORMATION SENT Evolution of the total number of filed reports 2010-2023 55948 38744 52374 50197 60000 53259 44628 40782 40000 30710 CRF 20000 4866 8306 11138 4492 6866 11023 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Evolution of the total number of filed reports Focus on SARs / STRs and TFARs / TFTRs SAR / STR 10869 12000 10000 TFAR / TFTR 444 454 373 6000 4897 5098 2018 2019 400 321 7501 8000 4000 483 12479 6215 220 225 200 3197 2000 0 0 2017 2020 SAR STR 2021 2022 2023 2017 2018 2019 2020 TFAR 2021 TFTR 2022 2023 Evolution of the total number of requests for information sent 2020-2023 3000 2417 2148 1831 1800 2000 1000 CRF 0 2020 2021 2022 2023 FIU Luxembourg (CRF) Key figures for 2023 44 628 > 10 500 Filed reports In addition, cross-border reporting is done via FIU.net 2 765 762 ~ EUR 850 mio Registered professionals Disseminations sent by Disseminations received of assets currently frozen on goAML CRF from foreign FIUs 100% Top 5 Top 5 331 Digital and paperless Associated Top 5 International cooperation - International cooperation - Financial analysis reports Predicate Offences Information to foreign countries Information from abroad  Fraud  Tax offences  Counterfeiting and product piracy  Money laundering submitted to judicial authorities and other national AML/CFT authorities National and international cooperation Added value of the FIU Advanced investigative and analytical skills National and international cooperation Power to freeze transactions FOCUS ON INVESTMENT FIRMS EVOLUTION OF THE NUMBER OF FILED REPORTS, REPORT TYPES AND REGISTRANTS Investment firms Reminder note Legal definition of investment firms in Luxembourg Pursuant to Part I, Chapter 2, Section 2, Sub-section 1 of the Law of 5 April 1993 on the financial sector, the professionals of the financial sector (“PFS”) falling within the following categories are defined as investment firms:  Article 24-
  23. Reception and transmission of orders in relation to one or more financial instruments  Article 24-
  24. Execution of orders on behalf of clients  Article 24-
  25. Dealing on own account  Article 24-
  26. Portfolio management  Article 24-
  27. Investment advice  Article 24-
  28. Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis  Article 24-
  29. Placing of financial instruments without a firm commitment basis  Article 24-
  30. Operation of an MTF  Article 24-
  31. Operation of an OTF Evolution of the total number of filed reports (2020-2023) Focus on investment firms 90 80 76 74 70 51 50 2020 2021 2022 2023 Evolution of the number of filed SAR / STR and TFAR / TFTR (2020-2023) Focus on investment firms 80 72 66 65 60 41 40 20 10 10 8 8 1 0 2020 2021 SAR STR TFAR TFTR 2022 2023 Evolution of investment firms registered with goAML (2020-2023) Focus on investment firms 90 80 78 74 62 40 27 23 19 18 0 2020 2021 Number of investment firms registered with goAML 2022 Number of investment firms that filed a report during the year 2023 Ability to freeze suspicious transactions Reminder note  The CRF's decision to freeze may be taken at any time.  From the time you receive the acknowledgement of receipt of the report, until you receive a blocking decision from the FIU, you may decide, under your own responsibility, to execute the transactions referred to in your communications, as well as any subsequent non-suspicious transactions.  Blocking is not time-limited, but can be partial or total.  The CRF may spontaneously decide to release the freeze.  The blocking can be legally challenged before the Chambre de Conseil of the Tribunal d'arrondissement de Luxembourg.  Blocking is only considered if seizure and confiscation are likely:  either during the execution of an international letter rogatory,  or as part of a national investigation and prosecution. ML/TF TRENDS – INVESTMENT FIRMS TYPOLOGIES, SUSPECTED ASSOCIATED PREDICATE OFFENCES AND INDICATORS Main ML/TF typologies observed in 2023 Investment firms Use of complex and multi-jurisdictional (offshore) legal structures to dissimulate source of funds (SoF) and beneficial ownership, including the use of arrangements such as trusts and private foundations. Use of successive donations or private loans to substantially complexify the understanding and corroboration of actual substance of the initial source of wealth (SoW) or source of funds (SoF). Concealment of client’s or UBO’s actual country of residence for tax reporting purposes. It is important to note that these typologies are not necessarily independent. Indeed, they may sometimes be linked together within the same money laundering process. Evolution of the main suspected ML/TF associated predicate offences (2020-2023) Investment firms Forgery and fraud Misuse of corporate assets Active corruption Breach of professional obligations by another professional involved in the business relationship Money laundering La catégorie “Autres (non déterminées)” décrit principalement des informations négatives issues des médias et de name The "Other (unspecified)" usually referssuspects to reports for whichà no screening, ainsi quecategory des comportements (réticence primary offence caninformations, yet be determined at the of receipt.observés It involves fournir des manque de stage coopération) negative information from the media and name screening (26%), as well présentant des indicateurs de blanchiment ou de financement The "Other (unspecified)" category refers to reports for which as suspicious behavior observed as money laundering or at the du terrorisme. Au stade de indicative réception ces no associated predicate offenceofde can yetdéclarations, be determined terrorist financing (14%). aucune infraction primaire ne peut encore être déterminée. stage of receipt. It involves negative information from the media and name screening as well as suspicious behavior observed as indicative of money laundering or terrorist financing. 2020 2021 2022 100% 80% 60% 40% 20% 0% 2023 Main suspected ML/TF associated predicate offences in 2023 Investment firms 40% Tax offence 34% 30% Other (unspecified) 30% Money laundering Fraud 20% Fraud - tentative Forgery and fraud 10% Active corruption 9% Misuse of corporate assets 3% 0% 3% 3… 6% 4% 3% Embezzlement of public funds Other (specified) -10% Suspicions of associated predicate tax offences – Additional insights Investment firms Split of filed reports in 2023 for suspected tax offences per country of residence: Natural persons 5% Bahamas Belgium 10% France 5% Germany 5% Number of filed SARs and STRs for suspected associated predicate tax offences from 2020 to 2023 5% 30 14% 48% 25 Italy Luxembourg 20 10% 15 Split of filed reports in 2023 for suspected tax offences per country of incorporation: Legal persons 10 5 BVI Guernsey 17% Liechtenstein Luxembourg Panama 17% 17% 33% 17% 2020 2021 2022 TOTAL STR SAR 0 2023 Main ML/TF indicators of suspected associated predicate tax offences in 2023 Investment firms Unusual customer behavior Open-source information 11 5 Economic background of the account user Customer non-compliance with their tax obligations 3 7 4 Reluctance to provide KYC/KYT documentation 4 10 Suspicious transaction scheme 8 Inconsistencies in the economic origin of funds Inconsistencies in KYC/KYT documentation 8 Offshore companies Main ML/TF indicators of suspected unspecified associated predicate offences in 2023 Investment firms Open-source information 9 Economic background of the account user Use of forged documents 2 2 Reluctance to provide KYC/KYT documentation Inconsistencies in KYC/KYT documentation 2 2 2 Sanctions 6 Suspicious transaction scheme 3 3 Unusual customer behavior Transactions exceeding 10.000 EUR Trends regarding suspected ML/TF associated predicate offences between 2020 and 2023 Investment firms 4   The number of filed reports regarding suspected tax offences has been multiplied by 2.7 between 2020 and
  32. The number of filed reports regarding suspected cases of money laundering has been multiplied by 2.3 between 2020 and
  33. 2,7 3 2,3 2 1 0 -1 -2 Tax offence Money laundering Fraud Other (unspecified) Breach of professional obligations by another professional involved in the business relationship Emerging trends in terms of suspected ML/TF associated predicate offences Investment firms Fraud (swindle) and fraud attempts  Reception of “client” requests for a change of contact details from unknown and unregistered email addresses.  CEO fraud attacks, where a fraudster contacts an employee to execute specific transfers or payments. Forgery and fraud    Fraudulent websites misusing the name of authorized investment firms. Use of forged and backdated documents. Use of falsified KYC documents. Embezzlement of public funds     Use of complex legal structures and arrangements (trusts, foundations) to conceal the actual origin of the invested funds. External exposure as it refers to foreign public funds, in line with the latest NRA for Luxembourg. Open-source information plays an important role in the increase for this type of report. Involves non-Luxembourg residents and citizens. CASE STUDY NON-RESPECT OF RESTRICTIVE MEASURES Case study – Non-respect of restrictive measures Person X of Russian nationality Investment firm Investment firm Financial instruments Investment firm buying on behalf of its client X different financial instruments. Case study – Non-respect of restrictive measures Bank account of Person X Bank of Person X Account of financial instruments Suspicious report Bank of Person X The account is currently blocked internally by the bank. The Bank detects purchases of financial instruments on the accounts of person X. Case study – Non-respect of restrictive measures Why did the Bank report those transactions? • Person X is not listed on a Sanctions list, but there is a potential non-compliance with restrictive measures (Council Regulation (EU) No 833/2014 of 31 July 2014). • Art. 5f
  34. Prohibition to sell transferable securities denominated in any official currency of a Member State issued after 12 April 2022, or denominated in any other currency issued after 6 August 2023, or units in collective investment undertakings providing exposure to such securities, to any Russian national or natural person residing in Russia or any legal person, entity or body established in Russia. Exception: This prohibition does not apply to nationals of a Member State, of a member country of the European Economic Area (EEA) or of Switzerland, or to natural persons holding a temporary or permanent residence permit in a Member State, in a member country of the EEA or in Switzerland. Case study – Non-respect of restrictive measures Two potential scenarios
  35. Exception does not apply • Non-compliance with restrictive measures; • Potential non-compliance with professional obligations for the investment firm.
  36. Exception applies • Non-compliance with restrictive measures; • Potential non-compliance with professional obligations for the investment firm; • Person X can buy without any constraints financial instruments. Remark: The CRF did not contact the concerned investment firm to requestSuspicious further report information in order to avoid any risk of tipping off. Bank of Person X Reminder: It is important that each professional does its own customer due diligence and carries out his or her own research and checks. BEST PRACTICE GUIDANCE PRACTICAL RECOMMENDATIONS AND A FOCUS ON ADVERSE MEDIA RESULTS Practical recommendations SAR vs STR (STRUCTURED DATA) When reference is made to an activity, but operations/transactions are described in the report, details of these operations/transactions, including dates, amounts, origin and destination accounts, etc., should be provided by completing an STR form (and not SAR). Ultimate beneficial owner identification An extract from the Register of Beneficial Owners (RBE) does not replace the report of beneficial owner document that the professional asks its client to sign. The CRF may request a copy of this report. CDD and file reviews The FIU noticed that many reports are made following a remediation process or a review of the business relationship. When such reports only contain past data without an up-to-date analysis, the information therein is not actionable and and will prompt the FIU to revert with requests for current information. Additional information For data consistency, we would be grateful if you could send us additional information about a reported file via RIRT (for a STR) or RIRA (for a SAR). Practical recommendations Request for opinion The CRF reiterates that it is not authorized to express any opinion on the legality/suitability of a transaction or entry into a business relationship (see point 8 of the CRF general guidelines). Responsibility for these decisions lies with the professional. As long as the CRF does not apply its blocking power, the professional is solely and exclusively responsible for its actions. In this context, the CRF has identified cases where the reporting entity appears to have made the execution or non-execution of a transaction conditional on the CRF's feedback (i.e., whether or not to open a file). Furthermore, the fact that the CRF closes a report without taking any further action at a given time in no way prejudges what may happen to that report, and can in no way be considered as an agreement by the CRF. A focus on adverse media results Adverse media (or bad press, negative news): In general, the mere fact that a person, entity or group is subject to a negative reputation does not in itself constitute a suspicion of money laundering (ML) or terrorist financing (TF). Such findings should trigger a careful examination of all the circumstances and factors involved in the business relationship, including but not limited to the origin of the assets, the respective funds, the entourage, etc. However: Example 1: SAR/STR on the basis of an adverse media alert relating to corruption • with information on assets directly linked to the main offence, or • with information on assets of apparently legal origin, but which could be confiscated by the equivalent at a later stage. In both cases, the information is potentially relevant and can be acted upon by means of a CRF blocking and an exchange with its foreign counterpart. Example 2: SAR/STR on the basis of an adverse media alert relating to terrorist financing The suspect's transactions may appear normal, but the SAR/STR containing financial and other information can be very valuable because of the information on: • geolocation of the suspect (cash withdrawals from ATMs, etc.), • movements of the suspect, • types of purchases, • links with other people (potential accomplices). Thank you for your attention ! Questions ? Q&As or email us at crf@justice.etat.lu

🔗 Vers la source officielle

AI explanation based on the official legal text. Indicative, not a substitute for legal advice.