CSSF annual report 2019

The report on the CSSF activities and on the development of Luxembourg’s financial centre in 2019 has been released and is available on the CSSF website.

The annual report contains numerous interesting practical details on the execution of the CSSF's regulatory and supervisory role in all supervised areas. We have flagged some interesting points for the banking and financial services sector below.

• Regarding financial innovation, one of the CSSF's priority areas, the annual report describes in particular the challenges posed by the regulation of virtual asset service providers, including requests received by the CSSF concerning the establishment conditions for the exchange of cryptocurrencies or the issuance of tokens. The CSSF also describes the efforts for regulation of virtual assets, continued in 2020, notably with respect to the AML/CFT obligations of virtual asset service providers.
• On the supervision of banks, the CSSF mentions the withdrawal of the banking licence of one Luxembourg entity and describes the close cooperation with the ECB as the direct supervisor of the entity and the competent authority regarding withdrawal. As far as PFS supervision is concerned, the CSSF intervened six times in 2019 to question the day-to-day management of specialised PFS, notably with regard to insufficient presence or involvement of managers in the day-to-day management or the need for reorganisation of administrative or management bodies.
• Regarding market abuse, the CSSF processed a large number of requests for assistance from foreign authorities and suspicious transaction reports from professionals established in Luxembourg. In the context of its supervisory function, it undertook on-site inspections and started a thematic supervision with a large sample of banks and investment firms to recall technical standards and measure compliance. These efforts continue in 2020.
• On the CSSF's instruments for supervision, the annual report contains a detailed section on the procedures and work of its "On-site inspection" (OSI) department. Three ad hoc on-site inspections occurred in 2019, concerning, in particular, governance and AML/CFT. Other inspections concerned notably topics ranging from operational risk, credit risk, corporate governance, business model and profitability assessment, MiFID compliance, the depositary function or IT risks. An interesting overview is provided of types of infringements having led to administrative sanctions.
• Finally, in a separate chapter devoted to financial crime, another priority area of the CSSF, its extensive control of regulatory compliance by AML professionals carried out through off-site and on-site supervision is detailed for all types of players.