Circular CSSF 18/702 is a CSSF circular, published 20 December 2018. Subject: Developments regarding the fight against money laundering and terrorist financing (AML/CFT) in the private banking sector.
\nRelevant for: AIFMs, Central Securities Depositories (CSDs), Credit institutions, Credit servicers, Data Reporting Service Providers (DRSPs), Investment firms, Investment fund managers, Investment funds and vehicles, Management companies - Chapter 15, Management companies - Chapter 16, Other specific authorisations, registrations and information, Part II UCIs, Pension funds, SICARs, SIFs, Specialised PFS, UCITS.
\nMain topic: Financial crime. Keywords: AML/CFT.
\nIn case of discrepancies between the French and the English text, the French text shall prevail.
\nLuxembourg, 20 December 2018
\nTo all the professionals subject to the supervision of the CSSF for the purposes of the fight against money laundering and terrorist financing
\nCIRCULAR CSSF 18/702 Re: Developments regarding the fight against money laundering and terrorist financing (AML/CFT) in the private banking sector
\nLadies and Gentlemen, 1) Introduction This circular addresses banks and other professionals of the financial sector that carry out private banking activities within the meaning of wealth management and associated activities. In the last years, the focus of many players of the Luxembourg financial centre shifted progressively towards private banking activities offering specialised services to international customers and to High Net Worth Individuals (HNWI). Considering the high risk inherent in private banking activities, the CSSF provided, over the last years, specific guidance to the banking sector aiming to prevent and mitigate existing or emerging risks of money laundering and terrorist financing (ML/FT) related to this activity. This includes: -
\nCircular letter of 3 December 2012 inviting the banks to adhere to the ICMA Private Wealth Management Charter of Quality; Circular CSSF 15/609 regarding the automatic exchange of tax information and antimoney laundering in tax matters; Circular CSSF 17/650 on the application of the Law of 12 November 2004 on the fight against money laundering and terrorist financing, as amended (hereinafter “2004 Law”)
\nand Grand-ducal Regulation of 1 February 2010 providing details on certain provisions of the 2004 Law to predicate tax offences; and Circular CSSF 17/661 on the adoption of the joint guidelines issued by the three European Supervisory Authorities (EBA/ESMA/EIOPA) on money laundering and terrorist financing risk factors 1.
\nThese communications are in line with the European regulations on anti-money laundering and combating the financing of terrorism and follow the FATF Recommendations of 2012 which specifically target the private banking activity as representing a potentially higher risk of money laundering or terrorist financing (ML/TF). In this context, the risk assessment undertaken by Luxembourg in 2018 allowed identifying a high risk for private banking activities. This circular is in line with previous communications of the CSSF. Its purpose is to guide the banks and to increase their awareness so that they continue strengthening their anti-money laundering and terrorist financing framework and ensure that the measures to mitigate the ML/FT risks they implemented remain effective. 2) ML/FT risks in the private banking sector in Luxembourg ML/FT threats may appear notably in relation with customers: • • •
\n• • • • •
\nwhose wealth stems from high-risk business sectors; from countries that are associated with high ML/FT risks; from countries subject to international or national sanctions or upon which certain countries have imposed or envisage imposing sanctions, on country-level or on some of these undertakings and/or citizens; PEPs (politically exposed persons) and their relatives and associates; requesting a discreet service; involving transactions with high amounts; having a number of important accounts; using dedicated products and services that can be a source of higher ML/FT risk, including using less transparent and/or complex legal structures.
\nThe inherent risk is amplified where the professional in Luxembourg does not have a global overview of the customer, owing to the multitude of banking relationships of the latter. Among the underlying ML offences that are the most likely to constitute a threat, the offences of corruption, fraud and forgery need to be mentioned. In addition, there is also the ML risk linked to illicit traffic in narcotic drugs and psychotropic substances.
\nThe text above is the opening of the document; the PDF carries the whole.
\nDocument page, PDF. Source: Commission de Surveillance du Secteur Financier (CSSF), reproduced with the CSSF's consent. The French text prevails.
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