Despite a year 2020 marked by the economic complications linked to covid, financial sector professionals had to maintain a high level of regulatory compliance, particularly in terms of reporting to the Financial Intelligence Unit. Responsible for receiving and analysing suspicions of money laundering and terrorist financing reported by financial institutions, the FIU notes in its 2020 annual report that the pandemic situation "has had repercussions on the work plan" and on "active and passive cooperation with professionals".

As the FIU points out, "criminal groups quickly seized the opportunity to exploit the health crisis", citing strategic studies by Europol and Interpol. Criminal organisations adapted their modus operandi or engaged in new activities by taking advantage of the shortage of personal protection equipment, for example.

The statistics on the number of reports received by the FIU speak for themselves. While the FIU received only four reports related to the covid pandemic in March 2020, the number of similar reports exploded in the following months to 94 in April and 219 in May. In total, the FIU received 1,933 covid-related reports in 2020, of which 98% came from online providers and 2% from banks. Covid-related reports represented 4.7% of the total notifications sent to the FIU in 2020.

A slight decrease in reports

Despite the pandemic, the FIU reports a decrease in the number of reports received from financial sector professionals. While the number of reports had been rising steadily until 2018, reaching a peak of 55,948, the trend was then slightly reversed over the following two years. In 2020, the FIU counted 40,882 reports received.

This drop in reports is a reflection of the work the FIU has done with financial sector professionals to improve the quality of their reports of suspected economic crime. "The FIU has organised consultation meetings with the main reporters in order to optimise the reporting process," the FIU's latest annual report states. This has, for example, led to a decrease in the number of reports from the online service provider sector.

The number of reports issued remains an important indicator; too many poor quality reports could paralyse the FIU's workflow. The FIU therefore said it welcomes the actions undertaken with the industry to standardise their reports. As a result, the FIU is aiming for a situation where the number of declarations is further reduced while receiving more information.

A centrepiece

In its work of collecting and analysing financial intelligence, the FIU has had a key piece in its arsenal of tools since 2020: access to the central electronic research system concerning bank accounts and safes. Indeed, each financial institution regulated in Luxembourg must provide the financial sector regulator, the Financial Sector Supervisory Commission (CSSF), with access to their client files. This allows the CSSF to consolidate a central register of bank account holders in Luxembourg in order to facilitate its checks on the entities under its regulation.

In its latest annual report, the FIU states that it has direct access to the central register of bank accounts since 2020. As a result, its analysts can quickly check whether a person holds bank accounts in Luxembourg and in which financial institutions. We are told that this tool is used regularly, in fact whenever there is an indication of financial flows passing through Luxembourg.

However, the tool has its limits. Managed by the CSSF, the FIU does not have administrator access. Thus, we understand that each FIU analyst wishing to access it must do so manually via a dedicated and secure web interface.

Also, the central register of bank accounts is limited in terms of the data it contains. Indeed, it is limited to producing a list of bank accounts linked to an individual. That is the end of it. It is out of the question for the FIU's financial sleuths to know in an instant the balance and the history of transactions of each account. To do so, they always have to issue an information request to financial sector professionals to find out more about an account.

An increase in requests for information

Although the tool has its limitations, it nevertheless marks a revolution in the FIU's activities. In the past, its analysts had to be creative to link a person to a bank account. For example, it was already necessary to have the transaction history of an account belonging to a person in order to possibly identify another account belonging to that person, thanks to a transfer made between the two accounts.

Access to the central register of bank accounts has not only speeded up the FIU's analytical work, it has also enabled it to better target the information requests it issues to financial institutions. Between 2019 and 2020 alone, the number of information requests from the FIU has increased from 1,371 to 1,820.

From the FIU side, it is clearly explained that access to the register of bank accounts has contributed to the increase in information requests. Thanks to an instant overview of a person's banking relationships, it is now easier to request additional information from financial institutions.

Srel spy agency also involved

A reading of the law of 25 March 2020 which established the central register of bank accounts in Luxembourg shows that the FIU is not the only intelligence body with access to it. The law in question involved a modification of the law on the organisation of the State Intelligence Service (Srel). Insofar as the means used by the Srel would not enable it to obtain the information sought, the law authorises the intelligence service--under certain conditions--to access the central register of bank accounts.

As part of its investigations involving a financial aspect, the Srel could already have requested a banking organisation or any other financial institution to provide information relating to transactions. These requests for information could also include the names of account holders or beneficial owners.

Although access to the central register of bank accounts is a revolution in the Luxembourg intelligence community, access to it did not require major work. The FIU, for its part, wishes to make it clear that there is no interconnection of this register with its own database. This is the same principle on which the FIU can manually access the IT systems of the various public prosecutors' offices in Luxembourg.

From the various explanations provided by the FIU in its latest activity report, it appears that the institution has invested significantly in computerising its systems. The aim is to make the analysis of the information in its database more efficient. At present, the FIU boasts that it operates in an almost fully digital environment.

This article was originally published in French by and translated for Delano