On Wednesday 20 December, the CSSF (Commission de surveillance du secteur financier-the watchdog of the financial centre) has imposed fines on four banks-- CA Indosuez Wealth (Europe), DNB Luxembourg, Nordea Bank and Novo Banco, Luxembourg branch) and five other entities-- Experta Corporate and Fund Services Luxembourg, Link Corporate Services, Maitland Luxembourg, Pure Capital and Victory Asset Management for “medium or severe breaches”.

The CSSF press release states that after the Panama Paper revelations in April 2016, it “started to perform a comprehensive review of corporate accounts, whether or not related to Mossack Fonseca or Panama, and more particularly to verify the respect of “know your customer” and “know your transaction” obligations.”

In 2016, the CSSF appointed external auditors to carry out procedures in relation to offshore structures in a large number of banks, set out a questionnaire to all 73 banks active in private wealth management, and conducted a desk-based review of the responses. An on-site review was performed at the 30 banks holding 80% of all corporate accounts related to offshore structures. The sample represented 20% of all corporate accounts related to offshore structures.

The review procedures mainly covered the four following aspects:

• Due diligence procedural measures applied by the banks to offshore structures;
• Risk-based approach established by the auditors for sampling purposes;
• Know Your Customer (KYC) documentation and information testing on a sample of offshore structures;
• Know Your Transactions (KYT) information and documentation testing on a sample of offshore structures

The CSSF noted that:

“All these verifications showed that adherence to Luxembourg laws and regulations applicable to them at the relevant moments in time was the norm for a large majority of supervised entities reviewed.”

It continued:

“The CSSF will continue to firmly request and enforce the principle that Luxembourg banks, investment firms and other professionals in the financial sector thoroughly follow the professional obligations in the future, specifically with regards to the prevention of money laundering (including all elements relating to newly introduced primary offences) and will draw the appropriate consequences if they fail to do so, as was the case in the past.”