CSSF STRENGTHENS FINANCIAL CRIME PREVENTION EFFORTS

The Commission de Surveillance du Secteur Financier (CSSF) of Luxembourg intensified its efforts to combat financial crime in 2023, as detailed in its annual report. The regulatory body focused on three key areas:

1. Supervision of anti-money laundering and counter-terrorist financing (AML/CFT) measures
2. Enhancing the AML/CFT and financial sanctions framework
3. Developing the legal and regulatory landscape

AML/CFT supervision

The CSSF conducted comprehensive on-site and off-site inspections across various financial sectors These inspections revealed both good practices and areas needing improvement. Based on the information provided in Chapter XXI of the CSSF annual report, some of the most significant shortcomings identified by the CSSF in its AML/CFT supervision include:

• Inadequate Customer Due Diligence: Many supervised entities failed to properly identify and verify the identity of customers and beneficial owners
• Insufficient Transaction Monitoring: Weaknesses were found in systems and procedures for detecting suspicious transactions and activities
• Gaps in Suspicious Activity Reporting: Some entities did not file Suspicious Transaction Reports (STRs) in a timely manner or failed to report suspicious activities altogether
• Risk Assessment Deficiencies: Shortcomings were identified in entity-wide and customer risk assessments, impacting the effectiveness of risk-based approaches
• Governance Issues: Inadequate involvement of senior management and boards of directors in AML/CFT matters was observed in some cases

Additional Areas for Improvement were identified by the CSSF:

• Training Programs: Some entities lacked comprehensive and tailored AML/CFT training for staff and management
• Internal Controls: Weaknesses were found in internal audit and compliance functions related to AML/CFT
• Documentation: Insufficient record-keeping and documentation of customer due diligence measures and decisions were noted
• Emerging risks: Some entities failed to adequately address risks associated with virtual assets and new financial technologies

The CSSF emphasized the importance of addressing these shortcomings to strengthen the overall AML/CFT framework in Luxembourg's financial sector. The regulator continues to work with supervised entities to improve compliance and enhance the effectiveness of AML/CFT measures.

CURENTIS can assist financial institutions in Luxembourg in addressing these deficiencies and optimizing their AML processes. With CURENTIS' support, financial institutions can strengthen their AML/CFT frameworks, improve compliance, and more effectively meet regulatory requirements.