Targeted financial sanctions: Luxembourg rates collective investments medium inherent risk, low residual risk
By the RC Insight team, practitioners who have helped more than 80 fund promoters set up their AML/CFT framework since 2020.
Published
Luxembourg has completed its first vertical risk assessment of targeted financial sanctions related to terrorist financing and proliferation financing. It covers the period 2018 to 2023, is dated June 2026 and was led by the Ministry of Finance, with the CSSF, the AED, the CRF and other authorities.
What it says about funds
Collective investments are rated medium for inherent risk and low for residual risk. Among products, AIFs present a higher risk because of their target asset classes, notably private equity and real assets, although they account for only a small proportion of total net assets.
For comparison, the CSSF's sub-sector risk assessment for the collective investment sector (update 2025), which covers terrorist financing generally rather than sanctions, rates residual TF risk low for UCITS management companies and AIFMs.
What we recommend to RCs
- Cite this assessment in each fund's ML/TF/PF risk assessment, and say what it means for the fund's own strategy and investor base.
- For private equity and real-asset funds, check that sanctions screening covers the asset side (targets, sellers, co-investors, lenders), not only the investors.
- Keep the evidence of every screening alert and how it was cleared: it supports the sanctions figures in the RC's annual reporting.
For RAIFs, the RC report sent to the AED covers the results of the ML and TF risk assessment and statistics on transactions reported under financial sanctions, with amounts. See our guide to the AED RC report for RAIFs.