CSSF fines and reprimands managers for AML failures

Crestbridge gets CSSF depository licence in Luxembourg

Luxembourg’s financial regulator, the Commission de Surveillance du Secteur Financier (CSSF), on Friday said it decided not to impose a 10,000 euro fine on three unidentified investment fund managers for failing to comply with anti-money laundering (AML) requirements after they explained why they failed to meet a reporting deadline.

The supervisor said it went ahead with imposing a 10,000 euro fine on a fourth fund manager, identified as Fonds AAA Sarl, after this firm did not respond to a request elaborate on why it did not report on time. It’s not the first time Fonds AAA was fined by CSSF

The firms, three of which were not named, faced administrative sanctions for their non-compliance with cooperation obligations under Luxembourg AML and CFT laws. The CSSF issued the reprimands on 17 January 2024, in accordance with provisions that allow the regulator to impose penalties for such breaches.

The CSSF took action against these managers of alternative investment funds (AIFMs) for not submitting the required AML/CFT External Reports. According to CSSF regulations, these reports must be prepared by an approved statutory auditor and submitted annually within six months following the closing of annual accounts. For the accounts closed on December 2022, the reports were due by June 2023.

Despite receiving two reminders, the three AIFMs did not submit the required reports by the extended deadline of October 2023. This failure to comply constituted a violation of the legal mandate requiring cooperation with the CSSF.

Initially fined 10,000 euro

Initially, the CSSF announced fines of around 10,000 euro for the AIFMs. However, after considering the arguments and observations presented by the AIFMs during the right to be heard procedure, the CSSF decided to commute the fines to reprimands.

Fonds AAA however found itself fined after not reacting to CSSF requests for more information. “As the AIFM did not make use of its right to be heard and did not provide to the CSSF any information to explain the lack of submission, the CSSF informed the AIFM of its decision to impose the said administrative fine,” CSSF said.

The CSSF emphasised the importance of the AML/CFT External Reports as an essential source of information for its supervision activities. The publication of these sanctions, albeit anonymously, was made following an assessment of proportionality by the CSSF, as stipulated by the relevant legal provisions.

Luxembourg is home to a substantial number of AIFMs, with over 250 operating within its borders. These managers are responsible for managing various types of alternative investment funds, which include private equity funds, real estate funds, hedge funds, and other types of investments that do not fall under traditional categories like mutual funds.

Especially in private markets, AIFMs play a crucial role in the financial ecosystem by pooling capital from investors and investing it into a diverse range of assets, aiming to generate high returns through specialised investment strategies.