Lombard International Assurance was handed an administrative fine of €1.68m by the Commissariat aux assurances (CAA), the supervisory authority for the insurance sector in the Grand Duchy of Luxembourg.

In a decision statement on 20 March, the CAA said: "Following a contradictory procedure initiated in accordance with the provisions of the Grand Ducal regulation of June 8, 1979 relating to the procedure to be followed by the administrations of the State and municipalities, the Insurance Commission issued, on January 10, 2024, a
administrative fine of EUR 1,682,000 against the life insurance company Lombard International Assurance S.A., authorized in the Grand Duchy of Luxembourg, due to failures observed in the execution of its obligations
professionals in the fight against money laundering and the financing of terrorism."

The deficiencies were noted during an on-site inspection carried out by the CAA with Lombard International Assurance from November 24, 2021 to February 16, 2022.

The CAA further said it had "notably selected and analysed a sample of files relating to clients of the Insurance Company, as well as a sample of files relating to the approval of insurance intermediaries used by the Insurance Company".

The main failures identified during the "control" and retained at the end of the procedure were:

  • An overall assessment of money laundering and terrorist financing risks (“BC/FT”) of the Insurance Company had not been carried out – prerequisite however essential to the implementation of an approach based on ML/FT risks –, constituting non-compliance with the provisions of article 2-2, paragraphs 1 and 2, of the AML/CFT Law, and
    Article 3, paragraphs 1 and 2, of the CAA AML/CFT Regulation.
  • The approach adopted by the Insurance Company to respond to the quantitative questionnaires of the CAA, and to thus assign a ML/TF risk score to its stock of insurance contracts, did not comply with the provisions of Circular Letter 18/9 of the CAA specifying the terms and conditions introduction of new harmonized exposure risk assessment questionnaires money laundering and terrorist financing for life insurance companies.
  • The procedures relating to AML/CFT had not been subject to adequate control, in the to the extent that they contained provisions which were not in conformity with the legal framework and regulations applicable to AML/CFT, particularly with regard to definitions beneficial owners, high-risk countries and politically exposed persons.

In response to the fine, Lombard International Assurance said in a statement on 20 March; "Like all regulated financial institutions, the Company is regularly audited by its supervisor, the Commissariat aux Assurances (CAA). During a regular and planned audit undertaken by the CAA at the end of 2021, some historic procedural shortcomings were identified in LIA's anti-money laundering (AML) and counter-terrorist financing (CTF) diligence processes.

"LIA took immediate and comprehensive corrective actions to address the concerns raised, in full cooperation with the CAA, using the opportunity to further strengthen its diligence procedures and measures.

It further said this has notably included significant investment in:

  • Technology and processes: investment in the latest digital compliance software for advanced Know Your Customer (KYC) data processing and automated screenings.
  • Expertise: accelerating its existing recruitment plan of hiring additional experienced compliance professionals. The team and resources to tackle AML matters have been significantly reinforced.
  • Training and awareness: targeted additional training provided to employees, intermediary partners, and agents, ensuring full understanding and adherence to required policy application procedures.

"The fine is in no way related to any money laundering or terrorism financing activities at LIA. LIA maintains a zero-tolerance stance against money laundering and terrorist financing, and adheres to all evolving legal and regulatory requirements. Acknowledging the CAA findings and the corresponding administrative fine announced on 20 March, LIA remains focused on delivering sustainable growth and operational excellence, underpinned by a strong balance sheet and financial strength", the statement said.