by Evelyne Christiaens, Head of Legal Department
At European level, two documents have been of particular relevance for our industry during this past year:
- On 7 May 2020, the European Commission issued its AML Action Plan aiming notably at the creation of a new AML-dedicated EU agency, the strengthening of the existing regulatory tools and the enhancement of anti-money laundering supervision;
- On 1 March 2021 the EBA published its revised Guidelines on ML/TF risk factors, containing new guidance in particular on the identification of beneficial owners, and further sectoral guidelines, for example as regards crowdfunding platforms.
At national level, there were several legal and regulatory highlights during the year, starting with the following two national laws that were published in the Mémorial on 25 March 2020:
- The law amending the law of 12 November 2004 on the fight against money laundering and terrorist financing implements certain provisions of Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 (AMLD 5) into national legislation. This text extends the scope of the 2004 law among others to new professionals such as real estate promoters acting as intermediaries for the selling or buying of immovable property and real estate agents;
- The law establishing a central electronic data retrieval for IBAN accounts and safes requires all Luxembourg credit institutions and any institution servicing IBAN accounts and safes to set up a register of bank accounts to which the CSSF will have electronic access.
The summer season saw new regulations being published, in particular:
- CSSF Circular 20/744 of 3 July 2020, which complements CSSF Circular 17/650 providing details on certain provisions of the AML/CFT Law to predicate tax offenses. The amendments detail new indicators to be taken into account in the context of collective investment activities;
- The law of 10 July 2020 creating a register of fiducies and trusts;
- CSSF Regulation 20-05 of 14 August 2020 modifying Regulation 12-02 of 14 December 2012 on the fight against money laundering and terrorist financing, and Grand Ducal Regulation of 14 August 2020 modifying Grand Ducal Regulation of 1 February 2010 providing details on certain provisions of the amended Law of 12 November 2004 on the fight against money laundering and terrorist financing. Both texts aim at reflecting the evolution of the legislation on anti-money laundering and counter terrorist financing. The new CSSF Regulation contains, among other things, clarifications as to the AML/CTF risk-based approach, risk management and mitigation, customer due diligence policy, cross-border correspondent relationships and similar relationships and the risk assessment with regard to outsourced functions. It underlines that professionals must carry out an assessment of the ML/TF risk presented by any investment and to take due diligence measures which are adapted to the risk. Finally, the text clarifies the functions of the person responsible for compliance with the AML/CFT obligations (the Person Responsible for Compliance or RR) and of the person responsible for the control of compliance with such obligations (the Person Responsible for Control or RC).
The National Risk Assessment of money laundering and terrorist financing (NRA) for Luxembourg was also updated end 2020. It must be noted that the CSSF published its first ML/FT Risk Analysis on the Collective Investment Sector on 17 January 2020. This sub-sector risk assessment looks at ML/FT inherent risks, but also at risk-mitigating factors applied by Investment Fund Managers and competent authorities, as well as their impact on inherent risk and the resulting residual risk level.
A further development marked the beginning of 2021, with the release on 25 January 2021 by the Ministry of Justice of the first Luxembourg vertical assessment of money laundering and terrorist financing risks related to virtual asset service providers (VASPs).
The Covid-19 health crisis that struck the world from the beginning of 2020 also impacted the AML/CTF framework. The Financial Action Task Force (FATF) issued a paper in May on Covid-19-related money laundering and terrorist financing risks and policy responses to the threats and vulnerabilities arising from the crisis. In Luxembourg, the CSSF published Circular 20/740 providing guidance to all professionals subject to anti-money laundering and counter-terrorism financing supervision of the CSSF in relation to the money laundering and terrorism financing risks and AML/CFT implications of the Covid-19 pandemic.
Finally, ALFI has also been very active on the AML/CFT front these last few months. Dedicated working groups have updated the association’s AML Practices and Recommendations, and a new version has been released in May 2021. This publication aims at providing AML/CFT guidance to the securities sector in Luxembourg and is drafted on the basis of applicable EU and national legislation and regulations, as well as international standards. A new specific section of our guidelines is dedicated to the due diligence on the asset side. The updated guidelines were presented to ALFI members during an expert briefing organised on 20 May 2021.