On Friday, 13th December 2024, the Commission de Surveillance du Secteur Financier (CSSF) published updated guidance providing clarity on AML/CFT obligations, particularly for securities and assets in regulated and non-regulated markets. The publication is based on recent assessments, peer reviews, and insights from the Public Private Partnership OPC AML.

Key Points:

• ML/TF Risk Assessments: The CSSF emphasizes the responsibility of professionals to conduct ML/TF risk assessments, adapting due diligence measures to identify risks as per Article 34(2) of CSSF Regulation No 12-02.
• Regulated Market Securities: Securities admitted to trading on a regulated market are considered less exposed to ML/TF risks due to existing market controls. Professionals must demonstrate compliance with this classification when required.
• Unlisted Assets: AML/CFT due diligence must be performed on operations involving unlisted assets or when changes increase their ML/TF risk. Annual reassessment is not required if no significant risk changes occur.

Scope: AML/CFT Risk Assessment for Securities on Regulated Markets

A key question addressed by the CSSF is whether AML/CFT risk assessments are necessary for securities admitted to trading on regulated markets. Based on findings from recent assessments and peer reviews, the CSSF concludes that such securities are generally less vulnerable to ML/TF risks. This reduced exposure stems from the robust disclosures and controls inherent in regulated market operations.

Guidance: To comply with Article 34(2) of CSSF Regulation 12-02, professionals only need to demonstrate that the securities in question are admitted to trading on a regulated market. This suffices for AML/CFT risk assessment and mitigation purposes.

Frequency of Risk Assessments: 

The CSSF has clarified the frequency of risk assessments for assets not traded on regulated markets. While an initial risk assessment is mandatory to determine the extent of AML/CFT due diligence, subsequent annual reassessments are not required if no significant changes in the asset or associated risks occur.

Implication: Professionals can rely on the original assessment unless material changes, such as a shift in risk factors, necessitate an update.

Timing of Due Diligence Obligations

AML/CFT due diligence measures are required under specific circumstances:

1. Operations on Non-Regulated Market Assets: When professionals engage in activities such as the purchase, transfer, or sale of assets not admitted to regulated markets, a risk-based analysis must be performed.
2. Changes in Risk Profile: Any change in an asset that increases its ML/TF risk triggers an obligation to update due diligence measures.

Legal Basis: Article 34(2) of CSSF Regulation 12-02 mandates a documented analysis of ML/TF risks and the adoption of corresponding due diligence measures.

Conclusion

The CSSF’s guidance underscores a risk-based approach to AML/CFT compliance, balancing thorough due diligence with practical flexibility. Securities on regulated markets benefit from established safeguards, reducing compliance burdens for professionals. For non-regulated assets, regular assessments are streamlined unless significant changes arise.

This framework ensures that AML/CFT measures are proportionate, effective, and aligned with regulatory expectations, reinforcing the integrity of the financial sector while addressing ML/TF threats comprehensively.

Access full document here: https://www.cssf.lu/wp-content/uploads/FAQ-on-AML-Assets-Due-Diligence.pdf