A new investigation by Transparency International (TI) and the Anti-Corruption Data Collective (ACDC) has revealed that Luxembourg’s trillion-dollar investment funds industry is currently not required to meet the transparency and accountability requirements necessary to prevent its misuse by the financial criminals. Indeed, the Financial Action Task Force has already flagged this sector as being at a high risk for money laundering.
The investigation by TI and ACDC analysed the data from the Luxembourg Register of Beneficial Owner (RBO). The investigation revealed that in the case of investment funds, there is a lack of information about the real end-investors and the legitimacy of their funding sources. In fact, 81% of the 16,777 investment funds registered in the RBO did not declare any beneficial owners. In the cases where beneficial owners were declared, the information is not always accurate.
Overall, TI has identified two major loopholes in the Luxembourg’s current corporate transparency framework. Firstly, the current definition of a beneficial owner is inadequate. Secondly, there is a lack of verification mechanisms to ensure the quality and accuracy of the data in the register. TI thus advises the authorities in Luxembourg to review the beneficial owner definition to ensure that all beneficiaries of investment funds are accurately identified and recorded in the RBO. TI further advises that authorities should review the data currently in RBO to verify that legal entities are compliant. Cases of non-compliance and/or false information should be sanctioned in a timely manner. There should also be an appropriate mechanism to verify and validate the information provided by legal entities.
Source: Transparency International