CSSF fines Banque de Luxembourg after 2018 audit

The CSSF banking watchdog slapped a €1.3 million fine on Banque de Luxembourg (BdL) for weaknesses in its systems to detect money laundering and terrorism financing, the bank has said, as Luxembourg steps up its fight against clients parking dirty money in the country.

The Commission de Surveillance du Secteur Financier uncovered the deficiencies during a 2018 audit, the bank - which is owned by France's Crédit Mutuel - said in a press release in December, which had not previously been reported.

"The audit did not reveal any unlawful activity. The weaknesses identified, relating to facts prior to 2018, were immediately dealt with in a remediation programme", said the bank, which serves wealthy clients.

In May, the CSSF fined RBC Investor Services Bank to the tune of €237,000 for similar breaches. And in June, the regulator imposed a penalty of almost €240,000 on the European Depositary Bank for “severe infringements” of two laws related to fund management.

Luxembourg is gearing up for a review by the global anti-money laundering watchdog, FATF, this year. It failed the Paris-based body's previous assessment in 2010, and a repeat would be a devastating blow to the country's standing as the world's second-largest fund management centre.

FATF gave Luxembourg a clean slate four years after the 2010 echec. But the country's reputation has continued to suffer from regular reports that it remains a soft touch for those wishing to hide illicit funds.

In June, the European Commission took Luxembourg to court, asking the European Court of Justice to impose a daily penalty on the country for failing to put new EU rules to stop money laundering into law.

The European Union's weak defences against money laundering and terrorist financing are allowing hundreds of billions of euros in suspicious transactions to take place every year, the bloc's budget watchdog said in June. 

It is estimated that €700 billion to €2 trillion is laundered through the global banking system each year, according to the United Nations' office on drugs and crime – roughly 2% to 5% of the global economy. The value of suspicious transactions in the bloc amounts to 1.3% of the size of the EU economy, according to Europol, the EU's law enforcement agency.