Luxembourg’s first National Risk Assessment of money laundering and terrorist financing (NRA), published in December 2018, has concluded the Collective Investment Sector carried a high inherent money laundering and financing of terrorism (ML/FT) risk.
This finding is not unusual as it reflects similar conclusions of the Financial Action Task Force (FATF) and the European Commission in its own Supranational Risk Assessment.
In order to link the NRA to the entity-level ML/FT risk assessments that the CSSF performs annually of Investment Fund Managers operating in Luxembourg, and to develop a more granular and systematic perspective on the risks faced by the Collective Investment Sector, the CSSF began in 2019 an analysis of ML/FT risks affecting the aforementioned industry in Luxembourg.
Building on the findings from the NRA, this sub-sector risk assessment takes a closer look not only at ML/FT inherent risks, but also at risk-mitigating factors applied by Investment Fund Managers and competent authorities, including the Financial Intelligence Unit, as well as their impact on inherent risk and the resulting residual risk level.
The CSSF expects supervised entities involved in the Collective Investment Sector to reflect the findings and conclusions from this sub-sector risk assessment into their frameworks to ensure they remain appropriate to effectively mitigate ML/FT risks.
This document has used the results of discussions held in the Expert Working Group AML OPC chaired by the CSSF and composed of representatives of ALFI, ALCO, ABBL, LPEA, LUXREAL, IRE, Le Barreau and The Financial Intelligence Unit.