Luxembourg’s first National Risk Assessment of money laundering and terrorist financing (NRA), published in December 2018, has concluded that of the different banking sector activities, it was the private banking activity that carried the highest 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), the European Commission and a number of ML/FT supervisors from different jurisdiction.
In order to relate the NRA to the entity-level ML/FT risk assessments that the CSSF performs annually of all banks operating in Luxembourg, and to develop a more granular and systematic perspective on the risks in private banking, the CSSF began in early 2019 an analysis of ML/FT risks affecting private banking as an activity in general and, more particularly, private banking in Luxembourg.
In the course of the year, the ABBL’s Private Banking Cluster became associated to the process initiated by the CSSF and a permanent, joint Expert Working Group on ML/FT risks in private banking was created.
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 banks and competent authorities, their impact on inherent risk and the resulting residual risk level
The CSSF expects supervised entities engaging in private banking activities 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.
The Expert working group created will continue meeting on a regular schedule to discuss topics that are relevant to ML/FT prevention in private banking and banking in general and will, as required, update the findings and conclusions of this document.