Highlights:

The CSSF has launched its annual AML questionnaire for the year 2023. Answers to the questions will have to be submitted through the CSSF eDesk portal by 2 April 2024. The CSSF has also issued new guidelines for the AML/CFT Summary Report RC (“SRRC”).

Luxembourg Market Update:

The aggregate net assets of Luxembourg-domiciled regulated investment funds – UCITS and Part II funds, SIFs and SICARs – amounted to €5,285.01bn at the end of December, up 2.58% from €5,152bn the previous month and 5.1% higher than 12 months earlier, according to the CSSF. The financial regulator says the monthly increase was mostly down to rising prices in financial markets, which accounted for €128.6bn, along with modest net inflows of €4.20bn. The number of fund structures stood at 3,274 at the end of December, down from 3,293 the previous month, including 2,147 umbrella structures containing 12,864 sub-funds. The number of active fund units declined from 14,002 to 13,981 in December.

Regulatory Developments in and beyond Luxembourg:

21 January 2024: ESMA’s consultation on third RTS pack and guidelines under MiCA

The European Securities and Markets Authority (ESMA) has published two much-awaited consultations papers on guidelines under the Markets in Crypto Assets Regulation (MiCA) – one addressing reverse solicitation and the other focusing on the classification of crypto-assets as financial instruments.

In the first consultation paper, ESMA was soliciting input on proposed guidance related to the conditions for applying the reverse solicitation exemption and the supervisory practices that National Competent Authorities (NCAs) may employ to prevent its circumvention. This paper specifically delves into the exception concerning the provision of crypto-services by third-country firms and emphasises that firms cannot use this exception to bypass MiCA.

In the second consultation paper, ESMA is seeking input on establishing clear conditions and criteria for qualifying crypto-assets as financial instruments. The objective is to bridge the MiCA regulation with the Markets in Financial Instruments Directive II (MiFID II) and ensure consistency across the EU. The draft guidelines propose structured yet flexible conditions and criteria to determine whether a crypto-asset can be classified as a financial instrument. They also aim to strike a balance between providing guidance and avoiding a one-size-fits-all approach.

6 February 2024: Circular CSSF 24/853 – Long form reports of investment firms

The purpose of the circular is to introduce the key aspects of the revised long form report (the revised LFR) that will apply for the financial year ending 31 December 2023 for the first time for a sample of investment firms, namely all non-SNI IFR investment firms incorporated under Luxembourg law, including their branches and certain SNI IFR investment firms incorporated under Luxembourg law, including their branches (In-Scope Class 3 IF). Class 3 IF that are out of scope of the revised LFR are required to submit the long form report drawn up in accordance with Circular CSSF 03/113 for the financial year ending 31 December 2023. As from the financial year ending after 31 December 2023, all investment firms will be subject to the revised LFR.

15 February 2024: Council Regulation (EU) 2024/576 of 12 February 2024 amending Regulation (EU) No 833/2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine

The EU Council has updated Regulations (EU) 2024/576 amending Regulation (EU) No 269/2014 concerning “restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine.”

19 February 2024: 2023 Questionnaire on Financial Crime

The CSSF has launched its annual online questionnaire for the year 2023 collecting standardised key information concerning money laundering and terrorism financing risks to which the supervised professionals are exposed and the implementation of the related risk mitigation and targeted financial sanctions measures. Answers to the questions will have to be submitted through the CSSF eDesk portal by 2 April 2024.

26 February 2024: AIFMD II: Approaching publication and entry into force

The EU Council has unanimously adopted the text of AIFMD II. This vote follows the Parliament's adoption of this text on 7 February 2024. The newly adopted directive amends the AIFMD (Directive 2011/61/EU) and the UCITS framework (Directive 2009/65/EC). AIFMD II must now be published in the EU’s official Journal and it will come into force 20 days after publication. It must be implemented by EU Member States within 2 years from its entry into force and will become applicable from that date (which is expected to be in the course of Q2 2026), subject to specific transition provisions for existing loan originating funds and for the new reporting requirements.

29 February 2024: Circular CSSF 24/854 – Guidelines for the collective investment sector on the AML/CFT Summary Report RC (“SRRC”)

The purpose of this circular is to provide guidance on the Summary report dedicated to AML/CFT (hereafter the “SRRC”) to be prepared by the “Responsable du Contrôle” (“RC”) and submitted to the CSSF by the “Responsable du Respect” (hereafter the “RR”) in accordance with Article 42(7) of CSSF Regulation No 12-02 of 14 December 2012 on the fight against money laundering and terrorist financing, as amended (hereafter “RCSSF 12-02”). The new SRRC template is taking into account the existing market practices and shall be read without prejudice of any other AML/CFT requirements applicable to the entities in scope (e.g. EBA Guidelines, etc.). It focuses on key data points relevant for the CSSF’s supervision regarding the fight against money laundering and countering the financing of terrorism (“AML/CFT”) and is in line with its strategy of digitalisation and data driven supervision.

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Tobias Ettlin #ONEteam
‍#onewithyou‍

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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/‍