The AED expands AML/CFT reporting obligations

As part of its mission of monitoring and control in the area of Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT), the Administration de l’Enregistrement, des Domaines et de la TVA (AED) has reinforced its AML/CFT reporting obligations to include all unregulated alternative investment funds (AIFs) in Luxembourg. While AML requirements are not new, the AED has signaled a stronger commitment to enforcement in 2025, including increased follow-up, penalties, and fines for non-compliance. 

In 2025, all unregulated AIFs supervised by the AED must adhere to the reporting obligations with new deadline to submit the Responsable du Contrôle (RC) report by the end of June. The AED also makes available respective documentation such as the AML/CFT Questionnaire and supporting guide as well as already known AIF RC-RR identification forms.

Smaller AIFs and RAIFs, which often lack dedicated compliance resources, may therefore face significant challenges knowing that it also obligates them to have in place adequate AML/CFT policy and procedures, an AML/CFT risk appetite statement, analysis of business exposure and mitigation measures, and a defined risk-based approach. 

This article provides clarifications about the AED’s expectations, including key deadlines and practical steps to ensure compliance in this heightened regulatory environment.

1. The AED’s Expanded Supervisory Measures

The AED has recently emphasized stricter enforcement for all funds in scope of AED supervision, reflecting the growing importance of AML/CFT compliance in the alternative investment sector.

Other unregulated AIFs must now comply with similar stringent reporting requirements as those already applicable to RAIFs. This aligns with international standards and aims to address emerging risks associated with alternative investments, such as complex structures, cross-border activities, and exposure to higher-risk jurisdictions.

By submitting the RC Report and AML/CFT Questionnaire on time (with content now aligned between the two), unregulated AIFs will expose their AML/CFT framework and ability to manage AML/CFT risks effectively. For smaller funds, it would impose proactive planning, strategic resources allocation, and leveraging external expertise to navigate the complexities of AML/CFT compliance effectively.

2. Key Filing Deadlines for RC Report and AML/CFT Questionnaire 2025

The AED has introduced distinct and official deadlines for RAIFs and other unregulated AIFs for the submission of the RC Report and AML/CFT Questionnaire (which now foresees questions on terrorist financing (TF) in its updated version).

For RAIFs: 31 May 2025.

For Other Unregulated AIFs: 30 June 2025.

Late submissions may result in penalties or regulatory scrutiny. Similar penalties imposed by the CSSF (Commission de Surveillance du Secteur Financier) for AML/CFT violations typically range between €10,000 and €15,000.

3. Key Documents for All Unregulated AIFs

Each RAIF and AIF is required to submit the following documents:

1. A signed RC Report on AML/CFT purposes for the year under review
2. An AML/CFT Questionnaire (to be submitted by the RR)
3. The form appointing the RR and RC 
4. Evidence (such as Board of Directors’ minutes) showing the RR and RC were appointed through decision at management’s level

As a reminder, FAQs are available (AED website) to provide guidelines regarding the aforementioned appointments.

4. Understanding the RC Report

The RC is tasked with ensuring that the fund’s AML/CFT policies and procedures are up to date and compliant with Luxembourg regulations. This includes conducting regular audits, reviews, and risk assessments to identify and mitigate potential AML/CFT risks. 

For RAIFs and non-regulated AIFs, the RC Report must be tailored to reflect the specific risks and compliance measures applicable to these entities. This includes addressing the unique characteristics of alternative investments, such as their complex structures, cross-border activities, and potential exposure to higher-risk jurisdictions.

According to the guidelines set forth by the AED’s website, the RC Report must include:

1. The correct name of the RAIF and Registre de Commerce et des Sociétés (RCS) number
2. The results regarding the identification and assessment of AML/TF risks with separate risk assessments for measures taken to mitigate these risks, and the RAIF's tolerance level for AML/TF risks
3. The results of due diligence measures performed on clients, initiators of the RAIF, portfolio managers (to whom management has been delegated) and investment advisors, including ongoing due diligence (ODD)
4. The results of enhanced due diligence ( EDD) performed on intermediaries acting on behalf of their clients, including ODD
5. The results of EDD measures on individuals identified as politically exposed persons (PEPs) under the provisions of Article 3-2 (4) (d) of the AML/CFT Law.
6. The results of due diligence measures performed on the assets of the RAIF, including ODD
7. The monitoring of blocked positions at the level of the registers of bearer shares of the RAIF and/or intermediaries involved in the marketing of the RAIF
8. The periodic review of any business relationship according to its risk level 
9. The results of controls performed on the compliance of delegated services rendered by third parties (incl. adherence to legal, regulatory, and contractual provisions). If applicable, the reasons for selecting new third parties during the year should also be detailed
10. The statistical background of identified suspicious transactions, incl. the number of reports made by the RAIF to the Luxembourg Financial Intelligence Unit (FIU) and amount of related funds
11. The statistical background of reported transactions within the framework of financial sanctions related to TF, as well as those linked to the implementation of United Nations Security Council resolutions and acts adopted by the European Union, and amount of related funds
12. Number of Breaches of Professional Obligations to be specified. If none, this must be explicitly stated¹

5. Completing the AML/CFT Questionnaire

The AML/CFT Questionnaire covers a wide range of topics, including client due diligence, internal organization, and cooperation with authorities, as outlined in the AED’s updated guidance for RAIFs (March 2023) and aligned with the AML/CTF Law and CSSF AML framework.

For RAIFs and non-regulated AIFs, the AML/CFT Questionnaire must be completed with a focus on the unique risks associated with alternative investments. This includes addressing issues such as:

• The use of intermediaries and their compliance with AML/CFT regulations
• The complexity of fund structures, including multi-tiered ownership and cross-border transactions
• The potential for higher-risk jurisdictions and the need for tailored risk mitigation measures.

Entities should ensure that all responses are accurate and supported by relevant documentation, such as CDD records, risk assessments, board minutes approving the RC report, and evidence of RR and RC appointments.

6. Practical Tips for Compliance

To ensure a smooth filing process, professionals should consider the following practical tips:

1. Start Early: Begin preparing well in advance to avoid last-minute issues (gathering all necessary documentation, conducting internal reviews, addressing any gaps in compliance, etc.).
2. Verify the Submission Process: Ensure that all required fields are completed accurately and that the documents are formatted correctly 
3. Seek Expert Advice: Engage with AML experts to ensure that all filings meet regulatory standards. Additionally, alternative investment funds frequently attract investors from higher-risk jurisdictions or with complex ownership structures, necessitating EDD measures. The AML/CFT regulatory landscape is also constantly evolving, making it difficult to stay up to date without expert guidance while non-regulated AIFs may lack dedicated compliance teams, creating resource constraints that hinder the implementation and maintenance of robust AML/CFT frameworks. By seeking expert advice, funds can effectively address these challenges and ensure compliance with Luxembourg’s stringent AML/CFT regulations
4. Conduct Internal Reviews: AML/CFT policies and procedures should regularly be reviewed and updated, in response to triggering events that may impact the fund’s risk profile or regulatory obligations. These reviews should include periodic risk assessments to reassess the fund’s exposure to AML/CFT risks and ensure that CDD procedures are updated to address emerging threats or regulatory changes. By proactively monitoring and updating the framework, funds can maintain compliance and mitigate potential risks effectively
5. Train Staff: Provide regular awareness sessions to staff and other relevant parties (board members, compliance officers, fund managers, and third-party service providers, etc.) to ensure understanding of AML/CFT obligations and identification of potential red flags 

6. Conclusion

The AED’s expanded supervisory measures, now encompassing all unregulated AIFs, mark a significant shift in Luxembourg’s AML/CFT regulatory landscape. With the 31 May 2025 deadline for RAIFs and the 30 June 2025 deadline for other unregulated AIFs fast approaching, funds must act immediately to ensure timely and accurate submission of the RC Report, AML/CFT Questionnaire, and supporting documentation. 

Failure to meet these deadlines may result in penalties or regulatory scrutiny, underscoring the importance of prioritizing compliance efforts. By understanding the requirements, preparing in advance, and seeking expert advice, professionals can navigate the 2025 reporting season with confidence and ensure remaining compliant with Luxembourg’s stringent AML/CFT regulations.