Money laundering risk building up in private banks, Luxembourg regulator warns
29 Oct 2019

A move into ultra-rich clients combined with growing numbers of non-European customers means that the risk of money laundering in Luxembourg’s private banks is increasing, the head of the country’s financial regulator told the Luxembourg Times.

“The nature of cross-border private banking makes it vulnerable to being abused for illicit asset activity. An expanding client base from countries of lenient AML (anti-money laundering) rules requires increased scrutiny from the CSSF,” said Claude Marx, the head of the Comission de Surveillance du Secteur Financier (CSSF) said in an interview.

Clients with assets of over €20 million – so-called ultra high net worth individuals – bring in more than half of the money managed in Luxembourg. Their deposits went up by 4% last year, or €32 billion, figures from the bankers’ association ABBL show.

The share of non-European clients remained unchanged year-on-year at 11%. But this still means real-term growth of €3.4 billion to €40 billion, given that the overall market expanded by 9%.

East-West United Bank, a Luxembourg-based Russian private bank confirms a growing popularity of the Grand Duchy among its clients from Russia, Ukraine, Kazakhstan or Belarus.

The numbers for third-country clients could be even higher. The ABBL figures include legal structures that are domiciled in Luxembourg, but whose beneficial owners are outside the EU.

High-risk countries

A widespread money laundering scandal has roiled European banks including Danske Bank, Latvia’s ABLV and Deutsche Bank, with most of the suspicious funds stemming from Russia.

Systemic weaknesses in China’s financial system have also come in the spotlight as part of global money-laundering investigations.

The CSSF would not name specific jurisdictions it is concerned about. But industry participants speculated that China and Russia are in its crosshairs. Luxembourg has especially close business ties to China, with seven Chinese banks headquartered in the Grand Duchy.

By Zuzanna Reda-Jakima, Luxembourg Times, 29 October 2019

Read more at Luxembourg Times

RiskScreen: Eliminating Financial Crime with Smart Technology

Count this content towards your CPD minutes, by signing up to our CPD Wallet