In April 2015 the European Council approved the European Union's fourth directive on measures to counter money laundering and the financing of terrorism. The proposal was drawn up by the European Commission to update and strengthen the EU's protective measures against money laundering and terrorist financing, to ensure the soundness, integrity and stability of banks and other financial institutions, and to maintain confidence in the financial system as a whole.
Legislation implementing a substantial part of the EU directive came into force in Luxembourg on February 18, 2018, and, in conjunction with the country's tax reform law of December 23, 2016, it has now largely implemented the 4th AML Directive. The grand duchy has not limited itself to simply transposing the directive, but in some limited areas has gone further by incorporating additional recommendations of the Financial Action Task Force (FATF) that were not already implemented in European or Luxembourg law.
The legislation comprises:
Extension of the scope of the professional obligations to combat money laundering and financing of terrorism
A reshaped risk-based approach
New transparency requirements
A mandatory cooperation framework between financial intelligence units
Strengthening of the sanctioning powers of the relevant authorities
The impact on Luxembourg's AML and terrorist financing framework
Although Luxembourg has already adapted its legal and regulatory framework to implement the FATF recommendations, the impact of the 4th AML Directive should not be underestimated, because the directive tends to go further than the FATF and will affect THE practices of entities subject to the law, notably regarding customer due diligence. It is likely that institutions will be required to update their internal policies and procedures, as well as retrain their employees to ensure compliance with the revised due diligence obligations.
How can we help?
Any fund management company or AIFM must periodically conduct a risk assessment for its AML programme, a requirement strengthened by the 4th AML Directive. Even if it uses an external service provider such as a registrar agent, the primary responsibility for compliance with the legal framework rests with the management company or AIFM; the registrar agent merely acts as its delegate. This responsibility is further reinforced by the obligation to appoint an anti-money laundering and terrorist financing compliance officer as a member of the management or authorised manager. We can help you review and structure your AML programme in a practical and compliant way.
We can also provide dedicated training covering all AML-related issues relating to Luxembourg investments funds:
Understanding the division of responsibilities between investment funds, their management companies and registrar agents
Identifying the methods used by criminals to launder money and in the financing of terrorism
Explaining the relevant laws and regulations on countering money laundering and the financing of terrorism
Applying risk-based due diligence procedures
Explaining the sanctions regime and related responsibilities
Identifying examples of suspicious behaviour and escalating any concerns