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Highlights:
The CSSF has published a new FAQ on AML/CFT asset due diligence obligation in relation to the implementation of Article 34(2) of CSSF Regulation 12-02.
Luxembourg Market Update:
Luxembourg has been growing again in 2024 after two difficult years, reaching €5.66trn at the end of September. The sector's resurgence in Luxembourg has been driven by global stock market performance, although the number of distinct fund entities continues to decline as umbrella fund structures predominate. Luxembourg remains a significant global player, second only to the US, but faces growing competition, particularly in the ETF market, where Ireland has a strong advantage. As of mid-year 7.9% of all funds assets worldwide were invested in Luxembourg vehicles, according to Efama, down from 9.0% five years earlier, while Ireland's share has grown from 4.5% seven years ago and 5.9% in 2023 to6.4% in June.
Regulatory Developments in and beyond Luxembourg:
18November 2024: CSSF FAQ on KIDs
The CSSF has released an updated version of the FAQ on the Key Investor Information Document (KID). The modification related to questions 2, 9 and 11.
18November 2024: CSSF FAQ on AIFMs
The CSSF has released an updated version of the FAQ on alternative investment fund managers (AIFMs). The modification related to questions 14.H and 23.N.
27November 2024: EMIR 3 Package in force
Regulation(EU) 2024/2987 (EMIR 3 Regulation) and Directive2024/2994 (EMIR 3 Directive), known as EMIR 3 Package, aim to mitigate excessive exposures to third-country central counterparties and enhance the efficiency of Union clearing markets by introducing a series of substantial amendments to the existing framework.
The EMIR 3 Regulation modifies not only EMIR, but also CRR and MMF Regulation, whilst the EMIR 3 Directive amends CRD, IFD and the UCITS Directive.
The EMIR 3 Package was published in the Official Journal of the European Union on 4December 2024 and enters into force on 24 December 2024. Due to the absence of explicit transitional provisions in the EMIR 3 Regulation (except for Article 1points (4) and (9) which is subject to the entry into force of related RTS),the requirements of the EMIR 3 Regulation are applicable as from today, 24December 2024. By contrast, the EMIR 3 Directive provisions must be transposed into national laws by 25 June 2026.
The European Securities and Markets Authority (ESMA) is tasked with developing various sets of draft regulatory technical standards (RTS). Notably, the RTS concerning the active account requirement under EMIR 3 Regulation must be developed by 25 June 2025 and ESMA has already initiated a consultation in this respect, which began on 20 November 2024. The consultation will remain open until 27 January 2025, with a public hearing scheduled for 20 January 2025.
The lack of the relevant RTS at the date of the entry into force of the EMIR 3Regulation raises concerns on the market. It is worth noting that the EBA published on 17 December 2024 a no action letter stating that competent authorities (CAs) should not prioritise any supervisory or enforcement action in relation to the processing of applications for initial margin (IM) model authorisation received as a result of the entry into force of EMIR 3 until key RTS under the EMIR 3 Regulation become applicable.
5December 2024: CSSF Communiqué on DORA Regulation – reminders and advice on preparedness
As the application of DORA on 17 January 2025 is approaching, the CSSF has issued a Communiqué on the ESAs joint statement on the application of DORA. The publication, which can be accessed via the following links, aims to highlight the pragmatic and proportionate approach to be taken:
· Digital Operational Resilience Act | European Banking Authority
· ESAs Statement on DORA application
The CSSF also reminds the Financial Entities which will fall under the DORA Regulation of the following:
Under DORA Regulation Financial Entities are required to have an LEI code to be able to provide certain reporting. This requirement can be found, in particular, in certain level 2 texts (for example in ITS on the register of information, RTS/ITS related to reporting of major ICT-related incidents). The CSSF therefore advises Financial Entities which do not have an LEI code yet to proceed with the procurement and activation of an LEI code to be able to fulfil the requirements under DORA as from 17 January 2025.
Starting from 17 January 2025, Financial Entities are required to notify the CSSF of any major ICT-related incidents according to the requirements set up under the respective level 2 texts of DORA. This reporting will have to be performed via the eDesk platform, following the process already in place for reporting of incidents under Circular CSSF 24/847. The CSSF therefore requires the Financial Entities to proceed with creating the specific eDesk role of “IT Incident Notifier” that will have to be used to notify the related incidents via eDesk if they haven’t created it yet (please refer to the dedicated procedure “Major ICT-related incident notification” available on the CSSF eDesk Portal(edesk.apps.ccsf.lu)). The creation of the eDesk role of “IT Incident Notifier” before the 17 January 2025 is essential for Financial Entities to be able to comply with DORA requirements.
Regarding Article 28.3 of the DORA Regulation requiring Financial Entities to inform the competent authority about “any planned contractual arrangement on the use of ICT services supporting critical or important functions as well as when a function has become critical or important”, the CSSF would like to remind the following:
· Previously notified ICT outsourcing arrangements under circular CSSF 22/806 are not required to be re-submitted in the context of DORA.
· Contractual arrangements on the use of ICT services already in place prior to 17 January 2025 and which have not been notified under circular CSSF 22/806 because they do not qualify as a criticalor important ICT outsourcing under the aforementioned circular, these are also not required to be submitted as notifications to the CSSF, however they need to be listed in the Register of Information.
Further details on how to submit the new notifications under DORA after DORA entry into application will be provided in the coming weeks.
The CSSF also draws the attention of the Financial Entities to the ESA’s announcement of the timeline to collect information for the designation of critical ICT third-party service providers under DORA which can be accessed here (EBA/ESMA). This announcement specifies among others the date of the submission of the first register of information by competent authorities to the ESA being 30 April 2025, and the list of validation rules that will be used by the ESA when analysing the received registers of information. The CSSF will communicate in the coming weeks on the date by which Financial Entities will be required to submit their registers of information to the CSSF to allow the CSSF to further transmit them to the ESA by 30 April 2025. By providing their complete register on an annual basis, Financial Entities will comply at the same time with Article 28.3 of DORA regulation requiring them to “report at least yearly to the competent authorities on the number of new arrangements on the use of ICT services, the categories of ICT third-party service providers, the type of contractual arrangements and the ICT services and functions which are being provided.
6December 2024: Circular CSSF24/867 on technical specifications regarding submission to the CSSF of documents under Regulation (EU) 2017/1129 and the Law of 16 July 2019 on prospectuses for securities and general overview of the regulatory framework on prospectuses
The CSSF has issued Circular CSSF 24/867, an update of Circular CSSF 19/724 on technical specifications regarding submission to the CSSF of documents under Regulation(EU) 2017/1129 and the Law of 16 July 2019 on prospectuses for securities and general overview of the regulatory framework on prospectuses.
9 December 2024: CSSF Communiqué on 2024Questionnaire on Financial Crime
The CSSF has announced that it will start its annual online questionnaire for the year 2024 on 24February 2025.
The objective is to collect standardised key information concerning money laundering and terrorism financing (ML/TF) risks to which professionals under CSSF supervision are exposed and the implementation of measures to mitigate these risks. This cross-sector questionnaire contributes to the CSSF’s on going assessment of ML/TF risks present in the financial sector under its supervision and forms part of the AML/CFT risk-based supervision approach put in place by the CSSF.
The2024 questionnaire remains mostly unchanged compared to the previous year. However, some questions have been removed, added, or amended. The new and amended questions have been indicated in the questionnaire.
The final submission of the questionnaire will have to be completed through the CSSF eDesk platform by 4 April 2025.
12December 2024: Preventing Terrorism Financing Seminar by the CSSF and the CRF, in association with the ABBL and ALFI
The CSSF and the CRF, in association with the ABBL and ALFI held a seminar on Preventing Terrorism Financing on 8 November 2024. The slides can be found here.
13December 2024: CSSF FAQ on AML/CFT asset due diligence obligations
The CSSF has published a new FAQ on AML/CFT asset due diligence obligations (CSSF FAQ) in relation to the implementation of Article 34(2) of CSSF Regulation 12-02.
Of note are the following points:
1. ML/TF RA and AML/CFT DD general principle: The CSSF reminds the responsibility of each Professional to conduct its own ML/TF risk assessments and implement necessary AML/CFT DD to mitigate identified threats and vulnerabilities.
2. New clarification for ML/TF RA and AML/CFT DD on Listed Assets: For securities admitted to trading on a regulated market (Listed Assets), the CSSF FAQ provides that such assets are less exposed to ML/TF risks due to existing market disclosures and controls. Accordingly, in order to comply with the risk assessment and mitigation obligations, the CSSF confirms that it is sufficient for Professionals in that case to demonstrate, upon request, that such assets are indeed admitted to trading on a regulated market.
3. New clarification for ML/TF RA and AML/CFT DD on Unlisted Assets: For assets not admitted to trading on a regulated market (Unlisted Assets), the CSSF reminds that the initial ML/TF RA should guide the extent of the AML/CFT DD to be performed by the Professionals. However, the CSSF indicates that no annual renewal of the ML/TF RA of those Unlisted Assets is required if there is no relevant change on these assets during the year. The CSSF FAQ further clarifies that AML/CFT DD will have to be performed by the Professionals (i) when operations occur on the Unlisted Assets(e.g. purchase, transfer, sale), and/or (ii) when a change in the assets resulted in a higher ML/TF risk.
4. International financial restrictive measures: For the avoidance of doubt, the CSSF FAQ is without prejudice to the obligation for Professionals to take appropriate measures to comply with international financial restrictive measures (e.g. in terms of screening of the assets and their related parties against targeted financial sanctions lists).
13December 2024: SFDR update: ESMA Q&As on ESG fund names guidelines
ESMA has published three UCITS and AIF Q&As specifying certain aspects of the practical application of its Guidelines on funds' names using ESG or sustainability-related terms (the "ESG Fund Names Guidelines") with the aim of ensuring a smooth application of the Guidelines through a common understanding of key concepts. On 18 December, the CSSF updated its FAQ on the Sustainable Finance Disclosure Regulation (SFDR).
17December 2024: CSSF makes available the UCI forms for the notification of errors and instances of non-compliance under Circular CSSF 24/856
The new Circular CSSF 24/856 on the protection of investors in case of an NAV calculation error, an instance of non-compliance with the investment rules and other errors at UCI level enters into force on 1 January 2025. It repeals Circular CSSF 02/77.
In order to account for the new category of other errors introduced by means of this new circular, the CSSF replaces the current notification forms in place under Circular CSSF 02/77, by taking at the same time this opportunity to introduce a secure transmission channel for the notification forms via the eDesk platform or alternatively via automated submission via API (S3 protocol).
In order to provide concerned entities with the possibility to familiarise themselves with the new notification forms, the implementation will follow a two-stage approach:
The first stage will be initiated today by making the new notification forms available in the pre-production environment (“eDesk PREPROD platform”). This environment will allow every UCI, IFM and UCI administrator to take note of the new forms and to familiarise themselves with them. The notification forms will remain accessible on the eDesk PREPROD platform after 1 January 2025.
During the second stage, starting on 1 January 2025, the notification forms will be available in the production environment (PRODUCTION platform). From that point onwards, it will be necessary to submit actual notifications through the new transmission channels to the CSSF.
Any error/instance of non-compliance detected after 1 January 2025 need to be notified using either the eDesk platform or the S3 protocol. A user guide will be published informing about the complete production procedure.
Finally, the CSSF acknowledges that the implementation of the new notification forms along with the new transmission channels, can lead during the first three months to certain delays in notifying the CSSF of errors and non-compliances covered by Circular CSSF 24/856, as industry participants will have to familiarise themselves with the above-mentioned changes in the notification process.
18December 2024: CSSF adopts EU Council Regulations on International financial sanctions: Ukraine/Haiti/Korea/Belarus/Soudan/Russia
The CSSF has adopted the following EU Council Regulations on International financial sanctions targeting Ukraine/Haiti/Korea/Belarus/Soudan/Russia:
· Council Regulation (EU) 2024/3189 of 16 December 2024 amending Regulation (EU) No 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine
· Council Regulation (EU) 2024/3192 of 16 December 2024 amending Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine
· Council Implementing Regulation (EU) 2024/3183 of 16 December 2024implementing Regulation (EU) No 269/2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine
· Council Implementing Regulation (EU) 2024/3138 of 16 December 2024implementing Regulation (EU) 2022/2309 concerning restrictive measures in view of the situation in Haiti
· Council Implementing Regulation (EU) 2024/3152 of 16 December 2024implementing Regulation (EU) 2017/1509 concerning restrictive measures against the Democratic People’s Republic of Korea
· Council Implementing Regulation (EU) 2024/3177 of 16 December 2024implementing Article 8a(1) of Regulation (EC) No 765/2006 concerning restrictive measures in in view of the situation in Belarus and the involvement of Belarus in the Russian aggression against Ukraine
· Council Implementing Regulation (EU) 2024/3156 of 16 December 2024implementing Regulation (EU) 2023/2147 concerning restrictive measures in view of activities undermining the stability and political transition of Sudan
· Council Implementing Regulation (EU) 2024/3188 of 16 December 2024implementing Regulation (EU) 2024/2642 concerning restrictive measures in view of Russia’s destabilizing activities
20December 2024: CSSF Communiqué on crypto-assets
The CSSF has issued a Communiqué on crypto-assets making reference to ESMA’s cautioning investors against being caught up in the hype surrounding the sudden and significant increase in the value of certain crypto-assets, advising them to carefully consider their financial needs and objectives before making any decisions. ESMA highlights the forthcoming Markets in Crypto-Assets Regulation (MiCA), which will introduce anew era of supervision for crypto-assets and related services. Nonetheless, while MiCA will strengthen investor protection, it will not eliminate all risks for investors. The ESMA’s document is accessible here.
24December 2024: CSSF issues new FAQ on Circular CSSF 24/856 on NAV errors
The CSSF has published a new FAQ on Circular CSSF 24/856 which entered into force on 1 January 2025 and which will repeal the existing CSSF FAQ on Circular CSSF 02/77.
The new CSSF FAQ includes a series of questions from the FAQ regarding Circular CSSF 02/77 insofar as these questions are still relevant in the context of the new circular. Most questions from the FAQ regarding Circular CSSF 02/77 have been withdrawn as the related clarifications have been integrated in the new Circular CSSF 24/856.
Furthermore, the new CSSF FAQ introduces some new questions concerning notably the scope of application of the Circular CSSF 24/856, the application of tolerance thresholds to closed-ended UCIs and non-compliant cost/fee payments at UCI level.
The FAQ regarding Circular CSSF 02/77 will continue to apply to errors /instances of non-compliance detected before 1 January 2025. With the entry into force ofthe new Circular CSSF 24/856 on 1 January 2025, the new CSSF FAQ applies to errors /instances of non-compliance detected as from 1 January 2025.
2January 2025: CSSF FAQ on undertakings for collective investment
TheCSSF has released an updated versionof the FAQ on undertakings for collective investment (UCIs). The modificationrelated to questions 1.16, 7.6 and 11.4.
For further information, please contact:
Tobias Ettlin
m: +352 691 111 931
Disclaimer: This regulatory update has been prepared for clients of ONE group solutions and its subsidiaries for informational purposes and is not intended to be relied upon as professional advice. Please visit: https://www.one-gs.com/