Recent Developments In The Luxembourg Financial Sector

Latest Developments in Luxembourg AML Regulations

On 19 July 2011, the Luxembourg financial supervisory authority, the Commission de Surveillance du Secteur Financier (the "CSSF") issued CSSF Circular 11/519 on the risk analysis regarding the fight against money laundering and terrorist financing ("Circular 11/519"). Circular 11/519 is addressed to all credit institutions and its purpose is to specify the CSSF's requirements relating to the risk analysis that these credit institutions are required to perform in accordance with the terms of the Luxembourg law dated 12 November 2004 on the fight against money laundering and terrorist financing as amended (the "Law of 2004"). Article 3(3) of the Law of 2004 provides that professionals that are within the scope of the Law "are required to perform an analysis of the risks inherent in their business activities. They must set down in writing the findings of this analysis."

According to Circular 11/519, the management of the credit institution is required to: (1) identify the risks of money laundering and terrorist financing ("ML/TF") to which the credit institution may be exposed; and (2) establish a methodology to categorise these risks and then define and implement measures to mitigate the identified risks.

Identification of ML/TF Risks

Circular 11/519 does not provide a list of potential ML/FT risks. Each institution must identify, categorise, and determine the importance of the particular ML/FT risks to which it considers itself to be exposed.

The following elements should be taken into consideration as they may reveal important information for an institution's analysis and assessment of its ML/FT risks. Such factors generally concern the nature of customers and the nature of the products offered and services provided, and include, but are not limited to:

Nature of Customers

the geographical origin and/or the activity sector/ profession of the customer; the means of entering into the business relationship with the customer (e.g., business providers, non face-to-face entry into business relationship); and the degree of complexity of the structure implemented for the benefit of the customer (e.g., use of front companies, trusts). Nature of Products Offered and Services Provided

the volume of cash transactions; the relations with correspondent banks (in particular when they are located in countries that do not apply ML/FT measures considered to be equivalent to those of Luxembourg); any transfers...

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