Roxane Haas and Cécile Moser from PwC (top row) and Glenn Meyer and Sandrine Périot from Arendt highlighted the importance of raising awareness and implementing AML/CTF policies. Photos: PwC Luxembourg (top row), Arendt (bottom row), editing by Maison Moderne

Roxane Haas and Cécile Moser from PwC (top row) and Glenn Meyer and Sandrine Périot from Arendt highlighted the importance of raising awareness and implementing AML/CTF policies. Photos: PwC Luxembourg (top row), Arendt (bottom row), editing by Maison Moderne

The CSSF, Luxembourg’s financial regulator, published a guidance document in late December 2022 to help agents and e-money distributors prevent money laundering and terrorism financing. Delano talked to experts from PwC Luxembourg and Arendt to find out more.

The states that there were 21 agents and one e-money distributor established and licensed in another EU member state and operating in Luxembourg as of the end of 2021. In comparison, over 109,000 agents and e-money distributors were operating in Europe as of March 2022.

With all the financial institutions present in the grand duchy, 22 firms doesn’t seem like a lot--so why is it so important for Luxembourg’s financial regulator to put out AML/CTF guidance for this part of the financial sector?

“I think you need to consider the risk not only in relation to the number of players, but also in relation to two additional elements as well: the volume of transactions and the number of transactions,” replied , partner in the banking & financial Services practice of Arendt. “Even a small number of players could significantly expose the country to risks from am AML/CTF perspective.”

Roxane Haas, partner and banking & capital markets leader at PwC in Luxembourg, had a similar point of view. “Luxembourg is a smaller country than other European countries,” she said. “But whatever the number of players you may have in Luxembourg, it will never reduce or eliminate the inherent risk that those players may expose the country to in terms of money laundering and terrorist activity.” Haas added, “Reputational risk is key for a country like Luxembourg and those players are part of the game.”

Any money-laundering or terrorism financing attempt that would successfully go through is already one too much.
Glenn Meyer

Glenn Meyerbanking & financial services partnerArendt

The CSSF guidance states that agents and e-money distributor processed a total of 318,184 transactions for a total value of €89.1m in 2021. This is “still quite a number, from a risk perspective,” Meyer pointed out. From a money-laundering perspective, the risk isn’t just related to the volume of transactions. “Any money-laundering or terrorism financing attempt that would successfully go through is already one too much,” he said.

For terrorism financing, “the volume of transactions is not what is so much entailing risks, it’s the number of transactions,” Meyer added. “Very often, in the field of terrorism financing, we are talking about lower amounts--substantially very often lower amounts--than in the field of money laundering.” So even though the actual amount of money in question might be smaller, risk remains. “This is still an exposure to risk that one has to take very seriously,” he said.

Risk exposures

The CSSF guidance document also mentions conclusions from Luxembourg’s national risk assessments, published in December 2018 and December 2022. These concluded that ‘residual risk exposures’ in the country’s money services business sector are medium, but ‘inherent risk’ is high. How are these differentiated?

“Inherent risk is the risk of money laundering and terrorist financing before you take any what we call mitigating factors into account,” explained Cécile Moser, audit and financial crime director at PwC Luxembourg. “It’s really when you look at the threats and the vulnerabilities in the market.”

Vulnerabilities include the large volume of transactions, the cash-based nature of transactions, the speed of payments and their geographical reach.

On the other hand, “mitigating factors are all the controls that exist at the level of the country--the fact that we have laws and regulations, national authorities, law enforcement, everything that the professional will put in place themselves,” said Moser. Residual risk is therefore what remains once you take ‘inherent risk,’ then add or subtract ‘mitigating factors.’ “At the end of the day, the risk is medium, because of all the protection that we have.”

Practical recommendations

The CSSF guidance document provides several practical recommendations, like implementing policies to ensure that staff members understand the controls that need to be done. But how else can companies protect themselves from risks related to AML/CTF?

“The first recommendation, if I may say, and the only way that such entities would protect themselves better from ML/TF risks, is to implement a proper and adequate AML/CFT framework,” said Sandrine Périot, AML/CFT partner in the regulatory consulting expertise of Arendt. The CSSF has given the theory--businesses then need to put it into practice.

“Some key elements of a framework include the need for businesses to conduct a risk assessment, as well as define a risk appetite statement--how much risk a business is willing to accept--and prepare a risk-based approach and categorisation of clients,” said Périot. “This means that a company needs to decide which customers it will conduct business with.”

These are a few components, but not all. “You need to focus in priority on the obligations that have been listed under the AML/CFT regulation, in particular the law and grand-ducal regulation,” Périot added.


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The CSSF guidance is “really a document that is supposed to help agents and e-money distributors to better understand the risk of money laundering and terrorist financing they are exposed to,” said PwC’s Haas, even though these players are outside the traditional finance sector.

Some of the red flag indicators mentioned in the guidance’s appendix might seem obvious, but it’s a good reminder of the necessity of meeting and applying professional obligations, complemented Moser. The document also serves as a reminder that agents can ask the payment institutions on behalf of which they work for assistance in establishing controls. The CSSF also provides help to professionals with guidance documents as well, but via conferences and website communications as well. “I think it’s also up to the agents and distributors to be aware that this information exists,” she said, and to be proactive.

“I believe that what is at stake in this field is globally so important that it is always useful to remind people through a guidance, or through any other sort of tool, of what it is that is at stake,” Arendt’s Meyer concluded. “Reminding people of what their obligations are always contributes to raising awareness, promoting a better understanding which is ultimately key in securing compliance.”

This article was published for the Paperjam+Delano Finance newsletter, the weekly source for financial news in Luxembourg. .