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Highlights:
The CSSF has issued a Communiqué and timeline on the newAnti-Money Laundering Regulation (AMLR) and a revision of the Anti-MoneyLaundering Directive (AMLD6).
Luxembourg Market Update:
Luxembourgalternative investment funds enjoyed €5.17bn of net inflows in April, accordingto the European Fund and Asset Management Association, but UCITS domiciled inthe grand duchy experienced €10.31bn of net outflows. Across the EU, UCITSattracted €34.93bn in net inflows, compared with €7.31bn for alternative funds.
RegulatoryDevelopments in and beyond Luxembourg:
30May 2024: CSSF publishes a communiqué concerning non-profit organisations andthe fight against terrorism financing
TheCSSF has published a communiquéconcerning non-profit organisations and the fight against terrorism financing(TF). The communiqué states that vertical risk assessments on TF published bythe Luxembourg Ministry of Justice in 2022 measure the level of TF riskexposure of certain non-profit organisations as high. The assessmentparticularly refers to the Luxembourg NPOs carrying out development andhumanitarian projects abroad.
TheCSSF emphasises the need for financial institutions to adopt risk-basedapproaches to identify high-risk NPOs and apply appropriate mitigation measureswithout stigmatising all NPOs. According to the FATF, in fact, improperde-risking could push NPOs towards unregulated financial services, increasingTF risks.
Thecommuniqué also addresses the latest international and European updates in thesector. The FATF has recently amended its recommendations, guidelines, andmethodologies to protect NPOs from TF abuse while maintaining their access tofinancial services. Additionally, the EBA has amended its guidelines tointegrate the factors that financial institutions must consider when assessingthe money laundering and TF risks related to a business relationship with NPOs.
Finally,the CSSF has drafted a non-exhaustive list of indicators that financialinstitutions could consider to determine if they are facing a TF risk situationthrough the abusive exploitation of an NPO.
13June 2024: CSSF Reminder regarding the communication means applicable for AIFMreporting from 1 July 2024
TheCSSF has issued a reminderto the attention of alternative investment fund managers (AIFMs): the CSSFpress release published on 22 September 2023 enabled the alternative investmentfund managers to transmit their AIFM reporting directly to the CSSF either viaan API interface (S3 technology) – from 2 November 2023 – or via the dedicatedeDesk approach – from 31 January 2024, free of charge. It also announced thatthe transmission of this reporting via external transmission channels wouldcease on 30 June 2024.
Asa reminder, from 1 July 2024:
· Only the API (S3) channel or theeDesk procedure will be authorised for the submission of AIFM reporting;
· Any AIFM report submitted using theold transmission method (external channels) will not be processed by the CSSF.
Theuser guide detailing the two transmission methods for AIFM reporting isavailable at following the link.
18June 2024: ESAs issue opinion to propose improvements on SFDR
TheEuropean Supervisory Authorities (ESAs) have issued a joint opinionregarding the assessment of the SFDR. In this opinion, the ESAs call for acoherent sustainable finance framework that caters for both sustainable financetransition and investor protection, taking into account the lessons learnt fromthe functioning of the SFDR. They also emphasize building on the objectives ofthe proposals of the Retail Investor Strategy to enhance retail investors'trust, confidence, and participation in financing the economy.
Intheir opinion, the ESAs recommend that the European Commission considerintroducing a product classification system, based on regulatory categoriesand/or sustainability indicator(s) to help consumers navigate the broadselection of sustainable products and support the full transition tosustainable finance.
Thecategories should be simple with clear objective criteria or thresholds, toidentify which category the product falls into. The ESAs encourage financialmarket participants to use at least two categories, 'sustainability' and'transition,' to ensure consumers understand the purpose of the products. Asustainability indicator could refer to environmental sustainability, socialsustainability or both, providing investors with a scale to illustrate thesustainability features of a product.
Financialmarket participants could apply the product categories on a voluntary basis,but the Commission could also consider testing a mandatory regime similar tothe current operation of SFDR.
Inaddition, the opinion also covers the following areas:
· Appropriate disclosures for productsoutside the two categories to reduce greenwashing risks,
· Improvements to the definition ofsustainable investments,
· Simplification to the way disclosuresare presented to investors,
· Other technical suggestions includedetermining which products should fall under the scope of SFDR and how toenhance disclosures regarding the negative impact of investments on people andthe environment, and;
· The need for consumer testing beforeputting forward any policy proposals to review the SFDR, such as to introduce acategorisation system and/or an indicator.
19June 2024: CSSF Communiqué on AMLR and AMLD6
TheCSSF has issued a Communiquéon the new Anti-Money Laundering Regulation (AMLR) and a revision of theAnti-Money Laundering Directive (AMLD6).
On19 June 2024, the Regulation of the European Parliament and of the Council onthe prevention of the use of the financial system for the purposes of moneylaundering or terrorist financing (‘AMLR’) was published in the OfficialJournal of the European Union. AMLR will enter into force on the twentieth dayfollowing its publication and will apply from 10 July 2027. On 19 June 2024 wasalso published the Directive of the European Parliament and of the Council onthe mechanisms to be put in place by the Member States for the prevention ofthe use of the financial system for the purposes of money laundering orterrorist financing and repealing Directive (EU) 2015/849 (‘AMLD6’). AMLD6 willenter into force on the 20th day following that of its publicationin the Official Journal of the European Union. Member States have three yearsfrom its entry into force to transpose the AMLD6 in their national legislation.
25June 2024: CSSF issues new notification templates for cross-border activities
TheCSSF has issued a communiquérelating to new notification templates for cross-border activities. On 25 March2024, the European Commission had published a set of new Regulatory TechnicalStandards (RTS or Commission Delegated Regulations (EU) 2024/911 and 2024/912)and Implementing Technical Standards (ITS or Commission ImplementingRegulations (EU) 2024/910 and 2024/913) related to the notification ofcross-border activities of Alternative Investment Fund Managers (AIFMs),management companies and Undertakings for Collective Investment in TransferableSecurities (UCITS).
Followingthis publication, the CSSF informed the supervised entities concerned that theymust use new templates of notification letters for their management andmarketing cross-border activities within the European Economic Area (EEA)starting from 14 July 2024. The new templates are available on the CSSFwebsite on the AIFM pageand the managementcompany page.
For further information, please contact:
Tobias Ettlin
m: +352 691 111 931
Disclaimer: This regulatory updatehas been prepared for clients of ONE group solutions and its subsidiaries forinformational purposes and is not intended to be relied upon as professionaladvice. Please visit: https://www.one-gs.com/