As the investigation is ongoing, no banking institution can comment on the substance of the Caritas affair, which has shaken the NGO . However, when asked by Paperjam, the Luxembourg Financial Sector Supervisory Commission (CSSF) and the Luxembourg Bankers’ Association (ABBL) were able to provide a few clues as to how €61m could have been misappropriated through bank transfers and credit lines.

"This case is an unfortunate reminder that financial crime does exist, that the scenarios and methods used by criminals are becoming increasingly complex, and that innovation is also on the side of organised crime,” the ABBL stated. “There is every reason to believe that this fraud was perpetrated by professionals with in-depth knowledge of the internal workings of Caritas, whether in terms of its governance, its projects or its financial processes”.

"Indeed, when executing transfers, banks are required to carry out a certain number of checks: for example, is the transaction in line with the profile and habits of the account holder or authorised representative (repeated transfers, unusual transfers of large sums, transfers to unusual recipients or countries, etc.). This also applies to the receipt of funds. If in doubt, the banks contact the account holder(s). If they suspect fraud, they report it to the Financial Intelligence Unit", an ABBL representative explained.

Sophisticated means

When it comes to granting a line of credit, as was the case in the Caritas affair, "the banks will assess the solvency and repayment capacity of the non-profit organisation: analysis of the financial statements, business plan and forecast budgets, payment history, guarantees and sureties, purpose of the credit, impact and viability of the projects, governance and management. What's more, a line of credit for amounts such as those quoted in the press cannot be granted by a bank adviser alone, but will be analysed by various bodies", said the ABBL. However, despite all these processes, the large-scale fraud may well have taken place, and the investigation will determine where the flaws were, and whether they were on the side of the banks involved, or Caritas, or both.

"On a daily basis, the banks identify and annihilate numerous attempts at fraud - often without the account holder being informed, or sometimes with the account holder being informed. However, in this case, the scenario of transactions and financial requests could be plausible for an association such as Caritas and the means used would be sophisticated,” such as the use of a CEO impersonation scam. “It is also highly likely that forged documents were used. All these elements combined probably prevented the banks from identifying the fraud, despite their rigorous checks," the ABBL stated.

Unanswered questions

The CSSF stated: "Banks are required to know their customers and to monitor and document transactions that pass through their books. When a bank suspects money laundering, it is obliged to report this to the Financial Intelligence Unit. In the event of serious breaches, the law provides for sanctions. In the case of Caritas, it would appear that the banks did not see the fraud coming, but the investigation will have to clarify this.”

“Nevertheless, once the courts and the supervisory authorities have done their job, lessons will certainly be learned from the Caritas affair,” the ABBL said. “In view of the criminal act committed against Caritas, the ABBL will redouble its efforts to raise awareness of fraud of all kinds, train banking staff and disseminate best practice in governance, risk management and the fight against financial crime. For years, we have been working with legislators and regulators to put in place a regulatory framework that is both strict and applicable in practice on the ground”.

Asked if the investigating magistrate had asked Eurojust to help block the money transferred to Spain and for what amount, the Public Prosecutor's Office referred to the secrecy of the investigation and the presumption of innocence. Caritas, for its part, did not provide any answers by the time of publication, particularly on the subject of whether or not a triple signature was required to make transfers over a certain sum, and whether it was delegated due to the absence of its director general Marc Crochet.

Read the French language version of this report