New FAQ on AML/CFT asset due diligence obligations provides practical guidance on CSSF Regulation No 12-02
On 13 December 2024, the CSSF published their first version of FAQ on AML/CFT asset due diligence. The FAQ was published in the context of Article 34 (2) of CSSF Regulation 12-02 which imposes an obligation on supervised entities to carry out on going due diligence on investments.
Professionals’ role in managing ML/TF risks
The CSSF emphasises that professionals bear full responsibility for conducting money laundering (“ML”) and terrorist financing (“TF”) risk assessments. Mitigating measures should directly address the risks identified during these assessments. This proactive approach ensures compliance and strengthens safeguards against ML/TF activities.
Lower risk for regulated market securities
Securities traded on regulated markets are considered low-risk for ML/TF due to stringent market disclosures and controls. The CSSF have indicated therefore that it is not necessary to carry out an ML/TF risk assessment on such securities. Professionals must, however, be ready to demonstrate, if requested, that assets are indeed admitted to such markets. This streamlined approach reduces unnecessary due diligence while maintaining compliance.
Annual risk assessments: flexible requirements
The CSSF acknowledges that annual risk assessments for assets not traded on regulated markets are not always necessary. If no significant changes to the asset’s risk profile have occurred within one year, renewal is not required. This adjustment eases administrative burdens without compromising risk oversight.
When to perform due diligence?
AML/CFT due diligence is mandatory in two key scenarios:
- For assets not traded on regulated markets, due diligence must align with the assessed risk level.
- When operations take place on assets (e.g., purchase, transfer, sale) that are not admitted to trading on a regulated market and/or when a change in the asset has resulted in a higher ML/TF risk.
Key takeaways for professionals
- Understand and document ML/TF risks comprehensively.
- Adjust risk assessments dynamically to reflect asset changes.
This FAQ underscores the CSSF’s commitment to a risk-based approach, offering clarity while reinforcing compliance. For more details, professionals are encouraged to consult the full document on the CSSF website.
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