AML/CTF Asset Due Diligence Obligations: CSSF Provides Clarifications in an initial Q&A

Overview

On 13 December 2024, the Commission de Surveillance du Secteur Financier (CSSF) published the first FAQ to assist professionals in the investment sector supervised, authorised, or registered by the CSSF in complying with Luxembourg’s anti-money laundering and counter-terrorism financing (AML/CTF) asset due diligence obligations.

The FAQ provides detailed guidance on the scope and frequency of ML/TF risk assessments and related AML/CTF due diligence measures to be performed pursuant to a risk-based approach. It distinguishes between:

• Listed Assets: Assets traded on regulated markets (as defined by MiFID¹)
• Unlisted Assets: Assets not traded on such markets

While professionals under CSSF supervision (including Luxembourg investment fund managers and investment funds supervised by the CSSF for AML/CTF purposes) must comply with these rules, the FAQ also offers valuable insights for professionals (as this term is defined by the Law of 12 November 2004 on the fight against money laundering and terrorist financing) that fall outside CSSF supervision, such as unregulated investment funds that are under the supervision of the Luxembourg indirect tax authorities (AED).

Key CSSF Clarifications

1. Reminder of certain general principles
The FAQ confirms that assets due diligence should be performed in accordance with the risk-based approach and the related risk assessment. In other words, the higher the ML/TF risk, the more thorough the due diligence needs to be.

The FAQ does not cover any aspects related to international financial restrictive measures and their respective specific requirements (i.e., targeted financial sanctions) to be complied with by professionals.

2. Listed Assets
The CSSF recognises that regulated markets incorporate measures such as market disclosures and controls, which reduce ML/TF risks for Listed Assets. Consequently, professionals must demonstrate, when required, that the asset is traded on a regulated market for the purposes of the risk assessment and mitigation.

Professionals should nevertheless continue to perform asset due diligence throughout the acquisition and holding period, including:

• Screening assets and issuers against targeted financial sanctions lists
• Reassessing the due diligence measures if changes in the assets increase ML/TF risks

While due diligence for Listed Assets can be less extensive, professionals are not exempt from their obligations and must ensure ongoing compliance. Reporting requirements are also less frequent compared with Unlisted Assets or assets traded on non-regulated markets.

3. Unlisted Assets
For Unlisted Assets, professionals must:

• Base their AML/CTF due diligence on an initial risk assessment. If no significant changes occur during the year, the CSSF allows professionals to forgo the annual risk assessment renewal
• Perform the AML/CTF due diligence (1) when operations occur on the assets (such as purchase, transfer, or sale), and/or (2) when a change in the assets resulted in a higher ML/TF risk

How Goodwin Can Assist

At Goodwin, we understand the complexities of AML/CTF regulations and are committed to guiding our clients through their compliance obligations.

Our team of experts, specialising in private investment funds and their managers as well as regulatory compliance, offers:

• Comprehensive reviews of ML/TF risk assessments and AML/CTF due diligence policies
• Assistance in screening and categorising ML/TF risks
• Tailored advice to help you stay aligned with CSSF requirements and protect your operations

If you have any questions or require support with AML/CTF compliance, please don’t hesitate to contact us.

 

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^[1] Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments.

 

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.