Anti-Money Laundering (AML) and Anti-Terrorist Financing (ATF)

Companies under an increasing pressure of regulators and ever-changing regulations

With growing pressure of regulators on Anti-Money Laundering (AML) and Anti-Terrorist Financing (ATF) issues, the danger of suddenly being involved directly or indirectly in money laundering or terrorist financing affairs is increasing simultaneously. Therefore, regulatory and reputation risks often belong to the major concerns of a rising number of company Board members.

Luxembourgish law

On the 27th of October 2010, the Luxembourg legislator passed a new law to reinforce and clarify the Luxembourg AML/ATF framework.

The purpose of the changes in law is to amend and supplement Luxembourg’s legislation in order to ensure a more effective enforcement of the prohibitions and measures that Luxembourg must implement following its international obligations toward the United Nations Organisation (UN) and to the European Union (EU). The Law takes into account the recommendations included in the Financial Action Task Force (FATF) mutual evaluation report on Luxembourg dated 19 February 2010.

This law, published on 3 November 2010 (the "Law") triggers amendments amongst others in (i) the Law dated 12 November 2004 on the fight against money laundering and terrorist financing, as amended ("AML/ATF Law"), (ii) the penal Code and (iii) the Law dated 5 April 1993 on the Financial Sector, as amended.

By means of this Law, Luxembourg is reinforcing and clarifying the legislation on fight against money laundering and terrorist financing notably in the following areas:

• Clarifications are provided regarding underlying offences, their definitions and applicable sanctions
• The scope of application is enlarged to:
  • managers and advisors of UCI,SICAR and pension funds
  • securitisation vehicles which act as service providers to companies and "fiducies"
  • insurance and reinsurance undertakings and their intermediaries in certain circumstances
  • foreign professionals providing services in Luxembourg on a cross-border basis without having established a branch (FPS)
  • and any other entity performing an activity mentioned in the Appendix of the AML/ATF Law
• A written documentation of a company’s specific business risk analysis in terms of AML/ATF is required for all entities in scope of the AML/ATF Law
• For simplified customer due diligence situations, the professional can decide to reduce its due diligence measures according to its own risk appreciation and not anymore applying exemption;
• Clarifications on the definition and monitoring requirements of PEPs are provided, notably leaders of political parties are considered as PEPs and PEP monitoring needs to be enlarged to Beneficial Owners of customers;
• The legislator is requiring more proactive and timely communication with the "Cellule de Renseignement Financier" (“CRF”) and is redefining the behavior towards customers in case of freezing orders of the CRF (express prior consent of the CRF necessary for client communication);
• The Law defines stricter and much more rigorous sanctions for breaches of professional obligations (up to EUR 1,250,000 in case of intentional breach).

Recommended Actions

The changes introduced by the Law of 27 October 2010 require all institutions within the scope of the Law to review their procedures to ensure that all changes are taken into account. Most importantly:

• Proper definition and documentation of the risk management approach regarding the fight against money laundering and terrorism financing;
• Review of customer identification and transaction monitoring processes and procedures;
• Review of the communication process vis-à-vis the CRF;
• Adjustment of training.

How PwC can help?

We can help you to comply with the ever-changing regulations and to meet best practices in order to prevent money laundering and terrorist financing. We can review your processes and develop the corresponding organisational structures to support and implement your AML/ATF strategy. In this respect, we provide a broad range of expertise and experience, including:

• Assessment of your AML/ATF risk-exposure;
• Diagnostic / review / gap analysis of AML/ATF policy and procedures of your entity (or intermediaries such as funds distributors, independent clients advisors) to provide you with the comfort that you are compliant, or have a program in place to become compliant, with AML and financial crime regulations;
• Assistance in AML/ATF tools pre-analysis to help you choosing the best integrated and comprehensive solution (name matching and transaction monitoring tools), based on an analysis of the specificities of your activities, law and regulation applicable to your company, size of your company, cost / efficiency ratio, etc.;
• Finding the best way to design and optimise your AML/ATF internal control system and tools (rules based engine, case management procedures, defining alert clearance and escalation procedures);
• Designing and implementing adequate and effective procedures;
• Review of your data management, Client Relationship Management (CRM) and Know Your Customer (KYC) systems and consideration of the necessity of remediation services;
• Design and facilitation of your AML/ATF training program.