Following a formal procedure based on the rules established by the grand ducal regulation of 8 June 1979, the Commissariat aux Assurances (CAA, or insurance commission) on 10 January 2024 on Lombard International Assurance S.A., a major player in the life insurance sector in Luxembourg. The penalty was due to a failure to comply with professional standards in the fight against money laundering and the financing of terrorism.
The CAA mentioned the following shortcomings in particular:
- Lack of risk assessment: the insurance company had not carried out an overall assessment of money laundering and terrorist financing risks, which is essential if it is to adopt an appropriate approach to managing these risks.
- Inadequate scoring methodology: the approach used to assess and assign a risk score to insurance contracts did not comply with regulatory guidelines, leading to incorrect assessments of the risks associated with each customer.
- Insufficient controls over procedures: anti-money laundering and combating the financing of terrorism (AML/CFT) procedures were not properly controlled and contained inconsistencies with the legal framework.
- Inadequate management of AML/CFT risks: the procedures in place did not effectively manage or reduce the AML/CFT risks to which the company was exposed.
- Inadequate verification of intermediaries: the company did not properly verify whether intermediaries complied with customer due diligence requirements, in accordance with the law.
- Incomplete customer information: the process of registering customers and updating their files was not systematically carried out with all the necessary information, depending on the AML/CFT risk.
- Deficiencies linked to primary tax offences: procedures did not take sufficient account of AML/CFT risks linked to tax offences, a problem considered to be very high in Luxembourg.
- IT tool malfunctions: the tools were not capable of detecting certain complex or unusual transactions or reporting suspicious activity as required.
- Delay in reporting to the Financial Intelligence Unit: the company did not inform the FIU of certain suspicions of money laundering or terrorist financing within the required timeframe.
- Inadequate human resources: the internal organisation and in particular the human resources dedicated to AML/CFT were unsuited to the company's business and size, compromising the effective management of AML/CFT risks.
These shortcomings were identified during inspections carried out between November 2021 and February 2022.
Lombard International Assurance has since initiated a compliance plan designed to remedy all the shortcomings identified, and which also covers its activities abroad. The progress of this plan is being closely monitored by the Luxembourg regulator, in consultation with the competent foreign authorities.
In a statement, the insurance company said: “The fine is in no way linked to any money laundering or terrorist financing activities at LIA. LIA takes a zero-tolerance stance against money laundering and terrorist financing, and complies with all evolving legal and regulatory requirements.”
This article was first published in French on . It has been translated and edited for Delano.