On 8 November 2022, the Commission de Surveillance du Secteur Financier (CSSF) published a statement regarding the AML/CFT controls applied for preventing tax offences.

Following the Law of 23 December 2016, the money laundering offence was extended to encompass aggravated tax fraud (fraude fiscale agravée) and tax evasion (escroquerie fiscal). Therefore, the professionals shall consider the tax crimes within the scope of their due diligence and professional obligations in terms of anti-money laundering and countering the financing of terrorism (AML/CFT).

The CSSF conducted the “UCI On-site Inspections” from November to December 2021 on the prevention of tax offences and concluded that the mitigation measures put in place by the entities inspected were satisfactory.

These are the key weaknesses found by the CSSF during their inspection:

  • The risk assessments do not always cover the aspects of circular CSSF 20/744 (the “Circular 20/744“), which provides guidance and new indicators on aggravated tax fraud and tax evasion to consider in risk assessment and risk mitigation measures;
  • The risk-based approach of the compliance monitoring plan or internal audit plan does not fully cover the tax offence. The CSSF emphasized that the investment fund managers (the “IFM“) shall design specific risk mitigation measures that integrate tax offences that include proportionately all relevant tax-specific indicators detailed in Circular CSSF 17/650 amended by Circular 20/744; and
  • The lack of monitoring from IFMs in respect of delegated subscription tax calculation. The CSSF advocates that IFMs mention their tax compliance obligations in their procedure and perform adequate monitoring where such activity is delegated to third parties.

The CSSF has also pointed out the best practices by the IFMs, being (i) the performance, documentation, and endorsement of a tax due diligence by the governing bodies of IFMs before performing complex investments and (ii) the reporting to and endorsement by the governing body of the IFMs of risk assessments relating to Circular 20/744.

Don’t hesitate to contact our investment management team should you need our assistance regarding your AML_CFT process.