Fight against money laundering and terrorist financing

INTRODUCTION

The development of international financial crime is a major destabilising factor for economies. Illicit money flows can damage the integrity, stability and reputation of the financial sector as a whole and threaten international development.

Financial crime covers a wide range of offences. Money laundering and terrorist financing are two of them. It is the scale and consequences of these activities that justify the arduous fight against this crime. It is no longer simply a question of "represson" of money laundering and terrorist financing, but of "preventing and mitigating" this type of activity.

WHAT IS MONEY LAUNDERING AND TERRORIST FINANCING?

Money laundering:

Money laundering is commonly defined as the act of facilitating, by any means, the false justification of the origin of the assets or income of the perpetrator of a crime or offence that has procured him a direct or indirect profit, as well as assisting in an operation to invest, conceal or convert the proceeds of one of these offences. In other words, the aim is to make funds of criminal origin appear legal.

In national law, money laundering is defined in article 506-1 of the Criminal Code and article 8-1 of the law of 19 February 1973 on the sale of medicinal substances and the fight against drug addiction, as amended.

The FATF has published a document providing further details on what money laundering means at international level.

Financing of terrorism:

Article 135-1 of the Criminal Code defines the act of terrorism.

The financing of terrorism is defined in article 135-5 of the Criminal Code as the act of providing or collecting by any means whatsoever, directly or indirectly, unlawfully and deliberately, funds, valuables or assets of any kind, with the intention that they should be used or in the knowledge that they will be used, in whole or in part, to commit or attempt to commit an act of terrorism, even if they have not actually been used for that purpose, or if they are not linked to one or more specific acts of terrorism.

If these two offences are not controlled and dealt with effectively, they can have serious social, political and economic costs and encourage the development of criminal organisations. Prevention, detection and investigation measures have been put in place to protect the financial system against money laundering and terrorist financing.

THE COMPETENT AUTHORITIES

At the international level, the FATF issues Recommendations on the fight against money laundering and terrorist financing. The FATF also monitors the progress made by its members in implementing its Recommendations.

At national level, there are several competent supervisory authorities and self-regulatory bodies. Article 2-1 paragraph 2 of the amended law of 12 November 2004 states that "The Commissariat aux Assurances, (...), is the supervisory authority in charge of ensuring compliance by natural and legal persons referred to in Article 2 subject to its supervision, with their professional obligations in terms of the fight against money laundering and terrorist financing (...) and their implementing measures"

The Financial Intelligence Unit ("FIU") is part of Luxembourg's economic and financial prosecution service. Its mission is to receive suspicious transaction reports in the field of money laundering and terrorist financing, to analyse and forward them, where appropriate, to the national prosecution authorities or to foreign counterparts.

The Ministry of Finance is the competent authority for financial sanctions. Given the significant growth in financial restrictive measures, the Ministry has published various documents on its website, such as guides to good conduct, questions and answers and other useful documents.

PROFESSIONALS

Article 2 of the amended law of 12 November 2004 lists all the natural and legal persons subject to the regulations relating to the fight against money laundering against the financing of terrorism.

Article 301 of the law of 7 December 2015 on the insurance sector, as amended, lists the persons subject to the supervision of the CAA as regards the fight against money laundering and the financing of terrorism.

The nominative list of professionals subject to the CAA's supervision can be found under the "Operators" tab on the website.

PROFESSIONAL OBLIGATIONS: A RISK-BASED APPROACH

Chapter 2 of the amended law of 12 November 2004 lists and describes all the professional obligations of operators in the insurance sector which have increased and become more stringent through a series of legislative amendments.

The risk-based approach is at the heart of these provisions. It allows professionals, in the context of their obligations, to adopt a set of more flexible or more restrictive measures depending on their assessment of the risk. They therefore apply preventive measures proportionate to the nature of the risks in order to optimise their efforts. However, in certain situations, professionals have no choice as to the extent of the measures they must apply. For example, the law requires them to apply enhanced due diligence measures to politically exposed persons.

The CAA has also issued a regulation and circular letters on the subject.

The professional obligations that must be complied with are:

• Obligations to perform a risk assessment
• Customer due diligence obligations
  • Simplified customer due diligence obligations
  • Enhanced customer due diligence obligations
• Adequate internal management requirements
  • Group-wide policies and procedures
• Requirements to cooperate with the FIU, the authorities and the self-regulatory bodies