On 10 April 2020, the Commission de Surveillance du Secteur Financier (“CSSF”) published a new circular 20/740 on financial crime and anti-money laundering and counter-terrorism financing (“AML/CFT”) implications during the Coronavirus (COVID-19) pandemic.
The CSSF advises all professionals subject to its AML/CFT supervision to be aware of the changes in the pattern of crime arising from this crisis and it provides structured guidance in the following areas:
Emerging money laundering and terrorism financing (“ML/TF”) threats arising from COVID-19
The CSSF warns about a series of related ML/TF crimes often associated with crises like the current pandemic, classifies them into two different categories and illustrates these risks using case studies:
- cybercrime and fraud – crimes that represent both a significant operational risk for financial institutions and an ML/TF threat; and
- bribery and corruption, trafficking of counterfeit goods, robbery or theft, and insider trading and market manipulation – crimes where the risk for financial institutions is primarily related to the laundering of illicit proceeds.
Emerging ML/TF vulnerabilities in the financial sector
The CSSF acknowledges that the current pandemic creates an ideal opportunity for money laundering, where rapid and high-volume financial transactions from myriad sources for various purposes are occurring simultaneously, and it encourages all professionals to remain vigilant in this context.
The CSSF further identifies the following activities and situations as particularly vulnerable, which criminals and terrorists could exploit:
- online payment services;
- clients in financial distress;
- mortgages and other forms of collateralised lending;
- credit backed by government guarantees;
- distressed investment products; and
- delivery of aid through non-profit organisations.
Mitigation of emerging ML/TF risks
The CSSF urges professionals under its supervision to continue to implement and maintain effective systems and controls to ensure that the financial system is not abused or misused for ML/TF purposes. There should be particular focus on AML/CFT business continuity, transaction monitoring, customer due diligence (CDD), ML/TF risk assessment and cooperation with authorities to deal with the changing nature of the ML/TF risk created by the pandemic.
The CSSF further encourages professionals to consult the CRF’s recent guidance on COVID-19 typologies, which includes several indicators of suspicious activity.
CSSF’s approach to AML/CFT supervision during this period
To summarise, the CSSF:
- remains deeply committed to combatting ML/TF and ensuring that the risks arising from and within the Luxembourg financial sector are effectively managed and mitigated, and it has refocused its interventions in order to maintain those which are currently key to preserving financial stability and protecting investors and consumers;
- continues AML/CFT supervisory activities during this period and will carry out initial inspections on a remote basis;
- continues throughout this period to communicate with professionals under its supervision on matters relating to AML/CFT; and
- continues to cooperate closely and exchange information with other authorities in order to maintain and further strengthen Luxembourg's national AML/CTF regime.