The Association of the Luxembourg Fund Industry’s Global Asset Management conference, held at the European Convention Centre in Kirchberg on 25-26 March 2025, brought together hundreds of industry experts for discussions on funds, technology, regulation, supervision and more.

The creation of a single market for investment products is one of the EU’s “greatest achievements,” said , a partner at Linklaters who works with investment funds, speaking during an on-stage interview with Financial Sector Supervisory Commission (CSSF) director Marco Zwick. But does it really work seamlessly?

“I really believe that the single market is working well in the majority of cases,” Zwick replied. “We have seen, over the past 30 years at least, the success of Ucits, of cross-border distribution. [There were] of course a few impeding factors at the beginning. But I think that has worked quite well over the years, and I think this is also due to the good cooperation within Europe, with our European colleagues, and also with the NCAs [national competent authorities] in other jurisdictions.”

As to whether gold-plating--which is when the powers of an EU directive are extended when transposed into national law--is an issue, Zwick said that it does happen, pointing to the European long-term investment fund (Eltif) as an example.

The Eltif regulation has undergone a revision process over the last few years, , which has brought a broader scope of eligible assets, a wider definition of real assets, the possibility to set up fund-of-fund strategies or master-feeder structures, the removal of minimum investment thresholds for retail investors and more flexible portfolio compositions.

The Eltif product is a “very important product,” said Zwick. “It is really something which--a little like the Ucits--is meant to be a cross-border product within Europe, with a European passport. And that makes it quite crucial that the rules which have been decided at level one and level two are consistently applied.”

When the Luxembourg financial regulator approves products and licences, it also gets feedback from the market, noted Zwick. “And the feedback which we got is that sometimes--it may happen--that in one or the other jurisdiction, the work which has been done by yourself, which has been approved by the CSSF, is partly put in question again.”

“The European passport is a huge opportunity that should not be considered as a threat by jurisdictions,” he emphasised. “That’s very important if we want to make this work. We should not always come back to all the discussions which we have had at level one and level two, but we should accept that there is a concept, that this concept is based on trust between regulators, and that this concept is also based in very fundamental rules.”

We can talk all we want about the capital markets union or the , says Zwick, which aim to get money flowing across the EU and provide businesses with more funding, but “at the end of the day, we need to avoid market fragmentation.”

“The fact that we went to Eltif 2 was the recognition that Eltif 1 was maybe not working,” he said. “So let’s really make Eltif 2 work, because it’s a really important product. In the absence of this, it risks putting us back decades in Europe in terms of the thinking of a single market and also the execution of the real ‘living’ of a single market.”

Success story of Eltifs

Using “lead management exercises,” the CSSF regularly reviews its processes to address bottlenecks and provide feedback to the market in a timely manner. The “vast majority” of all funds go through the pipeline quite quickly, said Zwick, though there are occasional exceptions.

And on the Eltif side, it’s been “successful.” The CSSF has allocated technical and human resources,  and prepared its team for the influx of applications. With around 100 Eltifs domiciled in Luxembourg, “we still represent roughly two-thirds of the Eltif market,” said Zwick. “We are very pleased about, proud of this. But it’s not enough. Please bring us more applications; my colleagues are waiting,” he joked.

Jokes aside, “I think Eltif is really a very interesting instrument,” said Zwick. “A lot of people speak about retailisation, and with the Eltif, you have really an excellent example of how you can get into the retail market.”

A more “nuanced” approach for ETFs

Luxembourg, as of 1 January 2025, abolished the subscription tax on all exchange-traded funds (ETFs). In addition, the CSSF in December 2024 relaxed transparency requirements on active ETFs by allowing managers to publish information on a monthly basis, with a maximum time delay of one month.

It was necessary to reconcile several objectives, said Zwick. Some players need more frequent information to be disclosed, others may not. “We have analysed this very carefully,” he added, “and I think we have now a much more nuanced approach.”

On-site inspection findings now more “targeted”

On the topic of anti-money laundering and CSSF inspections, “AML is no longer the topic with the most findings,” said Zwick, though it “still remains a very important topic.” And AML doesn’t lose significance after the visit, he added, reminding the audience that the “‘after-the visit’ [period] is just in front of the next visit.” Governance and conflict-of-interest findings are also common findings.

The “quality” of the findings has gone up, he noted. “Beforehand, you would have more general findings: procedures are missing, some processes are not in place, very high-level findings--bad findings, because you could say you start from scratch in some discussions.” Now the findings are more “targeted, such as shortcomings related to the frequency name screening,” he said, offering an example.

Suspicious activity reports also need to be filed as soon as the suspicion is raised, said Zwick. It’s therefore important to register in the GoAML software used by Luxembourg’s Financial Intelligence Unit so that, in the event you do have a suspicious activity report that needs to be filed, you’re ready to do so.

At the European level, the Anti-Money Laundering Authority (Amla) will be a key agency in coming years. Established in 2024 in Frankfurt, Amla in January 2025 named Bruna Szego its chair and appointed its executive management in February. Though it is not yet operational, said Zwick, the European Banking Authority is already working on policy-making and some publications have been issued. “Please read that,” he said. “It is very important, because now you have the chance to comment on it.”

Around 40 to 50 large entities in Europe will be subject to this European supervision in a first phase. But with thousands of companies present in Europe, “the vast majority is still going to be tackled by the NCAs,” said Zwick. “So the CSSF will also continue in its role.” But it will be “crucial that we avoid any regulatory arbitrage from Europe, because nobody is going to win.”

New technology and data security

Zwick and Prospert’s discussion concluded with a few words on artificial intelligence, digitalisation and innovation.

“We try not to preach water and drink wine,” said the CSSF director. Artificial intelligence is important in terms of the effectiveness of control and cost reduction, for instance, and “it’s really something which is very close to our heart at the CSSF. We also have started to employ AI, at a quite early stage.”

But “it’s about finding the right system and the right possibility to process a lot of highly confidential data,” Zwick cautioned. It’s essential to ensure that the data is fully protected. “And that’s the main reason why the , which offers a sovereign platform in Luxembourg, which gives us exclusive access in a highly-secured way.”

“I would not even exclude that other regulators in the world may also be interested in this type of solution,” he added. “The real thing is not about using AI; it’s about safeguarding information.”

Beyond risks linked to data, the lack of human oversight can also lead to risks, making it key for people to have the skills to use AI responsibly. It’s “equally important” to sort out ethical and societal concerns as it is to tackle technical challenges, he concluded.