Luxembourg’s anti-money laundering (AML) efforts face significant challenges, according to the 2024 EMEA AML survey released by the consultancy PWC Luxembourg. The survey, on Tuesday 16 July, sheds light on Luxembourg’s position in the fight against financial crime compared to other regions in Europe, the Middle East and Africa.
Technology adoption
The reluctance of companies in the grand duchy to adopt new technologies is a prominent concern, found PWC. Only 53% of AML teams in Luxembourg are considering adopting artificial intelligence, in stark contrast to 81% in the broader EMEA region. Furthermore, only 13% of Luxembourg respondents have implemented cloud solutions, compared to 53% in EMEA. This reluctance extends to budget allocations, with 13% of Luxembourg respondents stating they will not allocate any of their AML budget to new digital tools over the next two years, compared to just 5% in EMEA.
Costs and operational challenges
AML costs in Luxembourg have surged by 18% over the last two years, surpassing the 13% increase seen across the rest of EMEA. A significant portion, 69%, reported a cost increase of at least 10%, and 31% saw an increase of at least 30%. Recruiting skilled staff remains a critical operational challenge, with 44% of Luxembourg respondents citing this issue, compared to 24% in EMEA and 25% in the EU.
Regulatory confidence
Luxembourg respondents displayed scepticism towards current and upcoming AML rules, with only 22% believing they are fully effective. In contrast, 53% of EMEA respondents expressed confidence in current rules and 54% in upcoming rules. A substantial 90% of Luxembourg respondents indicated that implementing universal regulatory standards would significantly enhance AML effectiveness.
AML controls
Luxembourg respondents identified customer due diligence (CDD) as the strongest AML control, diverging from the broader EMEA view that considers CDD ineffective. However, 38% of Luxembourg respondents viewed upskilling staff as the least effective control, suggesting a potential undervaluing of employee training as a means to boost AML effectiveness.
Legacy systems continue to be a major issue as well, with 38% of Luxembourg respondents describing their AML operating systems as “outdated.” This technological inertia could hamper efforts to enhance AML measures and efficiency, PWC noted in the report.
, director general of the Luxembourg Financial Sector Supervisory Commission (CSSF), emphasised the need for technological advancements, stating in the report: “Overall, when it comes to AML and CTF [countering the financing of terrorism], financial institutions are not yet making optimal use of technology that would allow significant efficiency gains. As the survey also shows, many supervised entities use outdated systems when it comes to AML/CTF. This will hopefully change with new possibilities offered by powerful generative AI tools, that are becoming mainstream.”
Michael Weis, anti-financial crime leader at PWC Luxembourg, highlighted the competitive pressures facing firms in the grand duchy. “In recent years other financial centres have been increasing their footprint in the AWM [asset and wealth management] industry as fund domiciles, particularly for exchange-traded funds (ETFs). Luxembourg must continue to assert itself as the main European financial hub; effective and efficient AML is a crucial part of this process. Given the intricate nature of Luxembourg’s financial landscape, specialised AML operations are essential. This necessity, however, presents an opportunity for Luxembourg to distinguish itself. By routinely standing out in the most complex and technical aspects of AML, Luxembourg can continue to solidify its status as a premier centre of excellence in the financial sector,” said Weis.
The survey included 396 respondents from 40 countries, of which 10% were from Luxembourg.