CSSF outcomes on controls applied in terms of preventing tax offences

On 8 November 2022, the Commission de Surveillance du Secteur Financier (CSSF) published on its website the outcome of onsite inspections performed in November and December 2021 for Luxembourg-based management companies.

The purpose of these particular inspections were to ensure compliance with AML/CFT requirements to prevent predicated tax offenses as per CSSF Circulars 17/650 CSSF 20/744.

These inspections were satisfactory as, among those inspected, managements companies demonstrated an overall understanding of the risks associated with money laundering of tax fraud and that related mitigation measures were in line with CSSF expectations.

Nevertheless, the CSSF has identified three areas of weaknesses:

1. Risk assessment of the professional – Weaknesses in integrating all CSSF Circular 20/744 indicators into the risk assessment of the professional;
2. Shortcomings in the control functions environment – Weaknesses regarding verifications made by control functions (i.e., compliance monitoring and internal audit) in the context of money laundering of tax fraud;
3. Tax calculation, filing and reporting – Weaknesses regarding monitoring tax risks associated with investors’ tax compliance obligations (tax reporting calculation), funds (subscription tax), and securities lending activities.

When drafting or reviewing your AML tax process and policy, you should ensure that CSSF guidelines included in this communication are duly implemented.

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