Luxembourg’s anti-money laundering (AML) and counter-terrorist financing (CTF) regime was enhanced on 14 December 2012, when the CSSF introduced Regulation No12-02, in response to the 3rd Financial Action Task Force AML/CTF mutual evaluation report on Luxembourg issued in February 2010.
The new legal framework includes a new assessment of risks based on various criteria such as client risk, country risk, product risk and transaction risk. For example, a risk assessment on each new client or product needs to be carried out prior to client acceptance or product launch. The firm must also be in a position to communicate its risk assessment to the CSSF, if needed. It is therefore important for firms to document each assessment and follow a set risk assessment procedure tailored to the business.
The new regulation does not fundamentally change the way CSSF regulated firms will perform their AML/CTF duties, but ratherprovides further detail on the degree and occurrence on required AML/CTF practices. The first impact relevant to the fund industry is the enhanced level of due diligence to be performed by third party distributors of funds. The final responsibility of the AML/CTF regime remains with the funds or their management companies pushing the entities to ensure that third party distributors have AML measures in place equivalent to those in Luxembourg.
Finally, funds or management companies having contractually delegated AML/CTF checks to third parties must now have ongoing monitoring controls in place to ensure that third parties comply with AML/CTF due diligence requirements.
