2019 will definitely be a challenging year for compliance officers to implement all of the legislative and regulatory changes looming, given the transposition of the 4th and 5th anti-money laundering Directives, in line with the stepping up of international efforts to combat money laundering and the financing of terrorism.
There are currently two draft laws which will set up registers of beneficial owners of companies and trusts. The draft law N°7217 paving the way for the registry of companies’ beneficial owners has been adopted on 18 December 2018 by the Luxembourg Chamber of Deputies and is expected to be officially published in the Luxembourg Official Gazette (the “Memorial”) very shortly. The second draft law N°7216B establishing a register of trusts (“fiducies”) is still being discussed at the Chamber of Deputies, bearing in mind that the legislative process was put on hold due to the legislative elections.
The EU’s 5th Anti-Money Laundering Directive
The numerous novelties introduced by the 5th anti-money laundering Directive have yet to be transposed into Luxembourg law. The 5th Directive (UE 2018/843) which entered into force on 9 July 2018 notably provides EU Financial Intelligence Units and supervisory authorities with enhanced powers, making sure that the latter will have adequate financial, human and technical resources to perform their functions. One may associate the forthcoming new legal features of the 5th Directive with a key term: transparency. As a matter of fact, centralised automated mechanisms such as central electronic data retrieval systems to identify in a timely manner the holders of bank and payments accounts will have to be launched, especially with a view to allow FIUs to perform their investigation efficiently, whilst the access to the future registry of companies’ beneficial owners will be granted to the public at large, which may nonetheless raise privacy concerns, should appropriate personal data protection safeguards not be implemented with the draft law N°7217. Among others, enhanced customer due diligence measures will have to be applied when professionals engage in transactions involving high risk third countries.
Additionally, payment services providers will have to take into due consideration the new thresholds related non-reloadable payment instruments for business and clients due diligence purposes, having also noted that the 5th Directive will impose on the Luxembourg legislator to issue and keep up to date a list indicating the exact functions which should qualify as prominent public functions.
To prepare the financial community to the forthcoming profound changes and to get acquainted with the new legal requirements of the year 2018, the CSSF and the ABBL organised in December 2018 a joint conference on anti-money laundering and the combat of terrorism financing related issues. Representatives from the national financial supervisor and regulator, the CSSF (“Commission de Surveillance du Secteur Financier”) and the Financial Intelligence Unit (“Cellule de Renseignement Financier”) as well as banks’ and ABBL representatives provided in-depth knowledge and expertise on several hot topics .
First annual CSSF and ABBL compliance conference on AML/CFT
In presence of a large audience composed of compliance experts from virtually all Luxembourg credit institution, the off-site and on-site inspections teams of the CSSF (represented by Claude Wampach, Marco Zwick, Patrick Wagner, Guilhem Ros and Diane Friez), delivered key messages, notably with regard to the CSSF AML/CFT questionnaires which professionals had to fill out back in the summer of 2018. The CSSF strongly emphasised that the risks associated to AML were to be considered as top priorities and took this opportunity to present the trends and challenges arising out of the financial stakeholders’ answers gathered from the questionnaires, with a strong focus made on the risk-based approach and risk scoring.
Catherine Bourin, Member of the Management Board of the ABBL, together with two experts from the banking industry, Joseph Delhaye (BCEE) and Eric Kerschen (SGBT), have shared their thoughts on the challenges which the compliance function implies in an unsettled and ever changing legal environment, thus bringing to the fore the perspective of the industry in this field.
To finish with, Max Braun, newly appointed Director of the “Cellule de Renseignement Financier”, presented some interesting statistics on the various reports made by financial entities to the Unit for the year 2018, before describing what financial intelligence consisted of with regard to terrorist financing and how the source of information was being dealt with.
The ABBL will be closely following all AML related developments and promptly inform and guide its members on the numerous challenges ahead.
By Catherine Bourin, Member of the Management Board and Julien Leroy, Legal Adviser – ABBL