Luxembourg Financial Intelligence Unit (FIU) Annual Report 2020: Main conclusions – Criminal law
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As 2021 draws to a close, the Luxembourg Financial Intelligence Unit has published its annual report for 2020. This news flash summarizes the main findings.
As 2021 draws to a close, the Luxembourg Financial Intelligence Unit (FRC) has just published its 2020 annual report in French. Below is a summary of the main findings.
CRF strategic analysis
The CRF carried out important strategic work in 2020. The main line of intervention was aimed at improving its internal operational processes as well as the quality and relevance of the information received from professionals subject to the Luxembourg law of 12 November 2004 on the fight against money laundering and terrorism. financing (the AML Law). This concerned:
- the investment sector;
- business and trust service providers;
- virtual asset service providers; and
- types of money laundering that emerged in the context of the Covid-19 crisis.
The capacities of the CRF
From an operational standpoint, the CRF continued to invest in the analytical capacities of its teams specializing in:
- tax offenses;
- cybercrime in the broad sense; and
- complex bleaching structures.
The sustained cooperation between the public prosecutor of Luxembourg and the FIU on large-scale money laundering cases which gave rise to major judicial seizures was also noted.
Access to central registers
The CRF now has direct access to the following central registers:
- the central system for extracting data relating to IBAN accounts and safes held by Luxembourg credit institutions, which leads to a decrease in the number of requests sent to banks; and
- the Luxembourg register of trustee and trusts.
The CRF received 40,000 additional reports for 2020 (compared to 52,000 for 2019) and it blocked funds that exceeded 223 million euros (compared to more than 231 million euros in 2019).
Number of declarations
The number of reports received was 40,782, compared to 52,374 in 2019. This decrease was attributed to the constructive cooperation between the CRF and the reporters themselves. The number of reports received from online suppliers has decreased.1 The number of reports received from other sectors has increased.
- The number of standardized suspicious activity reports (SARe) received from online providers related to money laundering or related predicate offenses decreased in 2020;
- The number of non-standardized reports relating to money laundering or related predicate offenses (DASand STR) continued to increase. The same goes for reports including suspicious transactions received from online providers (STRe);
- The number of reports related to terrorism and terrorist financing remains high.
1 Online providers include payment institutions, electronic money institutions, virtual asset service providers, and retail and commercial banks doing business online.
Child pornography, infringements of intellectual property rights and suspicious transactions in virtual currencies were identified in 2019. Discussions between the CRF and Europol now also focus on:
- Sexual exploitation of minors and adults;
- Trafficking in human beings; and
- Fraud, with a focus on fraud linked to the Covid-19 crisis.
In addition to operational cooperation with Europol, the participation of the CRF in a public / private partnership organized by this European agency (“The Europol Financial Intelligence Public Private Partnership” (EFIPPP)) must also be mentioned. The EFIPPP brings together representatives of the public sector, in particular financial intelligence, police and customs services, and the private sector, in particular
big banks, as well as representatives with “observer” status (European institutions or international organizations, universities, etc.). This group aims to strengthen exchanges between the public and private sectors on major AML / CFT issues.
The CRF took the initiative to co-chair, with a representative of Commerzbank, a work program organized within the framework of the EFIPPP on offenses related to the Covid-19 crisis. The following typological reports have been established:
- Sexual exploitation of minors;
- Corruption and bribes;
- Illicit trade and associated financial flows;
- Infiltration into the legal economy;
- Money laundering through real estate;
- Fixed matches and bets;
- Investment fraud;
- Embezzlement of public funds;
- Fraud (non-delivery of goods);
- Sale of counterfeit products;
- CEO fraud.
The CRF is empowered to order reporters not to carry out customer-related transactions.
In 2020, the CRF took 291 blocking measures (compared to 89 in 2019) for a total amount of
EUR 223 924 013 (231,148,557 euros in 2019). The particularly high number of blocking orders mainly concerned one topic. Due to the complex structure of the file, separate block orders were required.
87 blocking instructions were linked to fraud (compared to 48 in 2019).
The total number of reports received from traditional banks decreased slightly, from 2,635 in 2019 to 2,503 in 2020.
Highest growth categories of primary offenses
Fraud and money laundering experienced the strongest growth and Covid-19 offenses largely explained the increase in fraud
With regard to money laundering, the very strong increase is mainly explained by a refinement of the internal classification of primary offenses by the FIU.
Reports of corruption continued to increase. The significant increase observed between 2018 and 2020 (from 82 to 210) is explained by the negative press articles published in 2019 and 2020, as well as by the vigilance of declarants vis-à-vis “money laundering” cases. Where in addition to inconsistent transactional patterns and / or corporate structures, there was a link with the bribery offense.
The FIU once again welcomed the increased vigilance of professionals vis-à-vis suspicious supporting documents, in particular loan or advisory contracts for which the economic justification was not clear.
The 2020 annual report includes the number of declarations by category:
Virtual asset service providers
Virtual asset service providers (VASP) have been added to the list of professionals subject to the AML law. However, it should be noted that the CRF has received declarations from establishments active in virtual currencies since 2016. Two entities active in this field were authorized payment establishments.
The increase in the number of declarations classified as “other” (from 748 in 2019 to 5,364 in 2020) is mainly due to the identification of suspicious transactions linked to online marketplaces on the Darkweb declared by the VASPs. They were able to set up transactions, executed by their clients, in the context of sales or acquisitions on illicit market places without the products or services being properly identified. In other cases, VASPs have identified economically unclear transaction behaviors, such as the use of mixers or transactions made for the sole purpose of confusing the origin of funds.
Fraud or counterfeiting
The decrease in the number of declarations linked to fraud or counterfeiting could be explained by the optimization of the declaration process set up with online service providers. It is also necessary to report statements relating to the sale of counterfeit or low-quality Covid-19 personal protective equipment.
Insurance sector entities that registered with the CRF’s “goAML” online tool continued to increase (82 in 2019 to 116 in 2020) thanks to an awareness campaign led by the insurance regulator , the CAA (Insurance Commission).
In total, there were 222 suspicious transaction reports in 2020 (250 in 2019).
Criminal tax offenses
The FIU noted that criminal tax offenses are at the top of the list of reported predicate offenses, highlighting a good awareness of this risk. To this end, the FIU referred to the list of indicators of money laundering in tax matters published by the Association of Insurance Companies (TO THAT) of April 2, 2020.
For 34 of the reports received in 2020 (out of 222), the FIU could not determine a specific primary offense because the report was too vague to qualify it If the circumstances giving rise to the suspicion concerned do not apply directly in one of the designated categories of offenses of the FATF, they are qualified internally under the denomination “not determined”. These statements can cover a wide range of such situations:
- violations of professional AML / CFT obligations, including client’s reluctance to provide required KYC documentation, or
- simple unusual / suspicious behavior of a respondent.
Referral to the prosecution
In 2020, 197 spontaneous reports (compared to 219 reports in 2019) were sent by the CRF to the prosecution teams concerned. The report does not provide any indication of how many such reports lead to successful prosecutions. However, the report provides examples of recent case law on legal issues (ie material element of money laundering or recourse against freezing orders of the FIU).
There has been a decrease in the total number of reports, however, criminal tax offenses and fraud remain areas where banks and insurers have reported the highest number of reports. Now that the VASPs have been added to the list of professionals subject to the AML Law, the CRF maintains regular exchanges with the CSSF in order to identify the VASPs active in Luxembourg, which may not yet have satisfied the obligation to registration. This area is likely to experience greater growth when next year’s report is released.
The FRC 2020 annual report is available here.
Read also our review of the 2019 report
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