Reference Financial Services received an administrative penalty of €114,000 for inadequate client and transaction monitoring, announced Luxembourg’s financial regulator, the CSSF, on Tuesday. Archive photo: Romain Gamba / Maison Moderne

Reference Financial Services received an administrative penalty of €114,000 for inadequate client and transaction monitoring, announced Luxembourg’s financial regulator, the CSSF, on Tuesday. Archive photo: Romain Gamba / Maison Moderne

The Luxembourg Financial Sector Supervisory Commission (CSSF) has fined Reference Financial Services €114,000 for significant breaches in anti-money laundering, counter-financing of terrorism and internal governance. These breaches included inadequate client screening and reporting procedures.

Due to failures in complying with anti-money laundering (AML), counter-financing of terrorism (CFT) obligations and conflict of interest management, Reference Financial Services, a specialised professional of the financial sector (PFS), was handed a €114,000 penalty by the Luxembourg Financial Sector Supervisory Commission (CSSF). The regulator flaggeddeficiencies in client information verification, transaction monitoring and internal governance practices. Reference Financial Services--authorised as a registrar agent, family office and corporate domiciliation agent, among other roles--faced this penalty following a CSSF onsite inspection focusing on its AML/CFT framework, the regulator on Tuesday 16 January 2024.

The inspection revealed significant breaches in both AML/CFT and internal governance frameworks. These included inadequate name screening controls, failing to detect individuals subject to financial prohibitions and restrictive measures, a violation of CSSF regulations.

Furthermore, the PFS’s client onboarding processes and maintenance of client files were found to be deficient, constituting a breach of both the AML/CFT law and CSSF regulations, as the PFS lacked complete and corroborated information on clients’ sources of funds. The CSSF also noted a failure in periodically reviewing clients’ files.

The PFS’s transaction monitoring and ongoing due diligence were also insufficient, according to the regulator, breaching the AML/CFT law and CSSF rules. Additionally, despite indications of potential money laundering, the PFS either failed to report or delayed reporting to the Financial Intelligence Unit, also a breach of the AML/CFT law and grand-ducal regulation.

The CSSF found that the firm’s AML/CFT procedures were inadequate, merely replicating legal and regulatory texts without practical implementation measures, in non-compliance with the AML/CFT law and CSSF rules. Moreover, the PFS’s risk-based approach was inconsistent and lacked comprehensive risk factor consideration.

Furthermore, the internal governance framework of the Reference Financial Services presented potential conflicts of interest due to the combination of commercial and AML/CFT functions by several individuals without adequate mitigation measures. This, too, was a breach of the law on the financial sector (LFS), the AML/CFT law and CSSF regulations.

Reference Financial Services had not responded by the time of publication of this article to Delano’s email request for a statement.

Related articles