From compliance obligation to building block

Luxembourg’s asset management industry is at an inflection point. Growth in cross‑border distribution, evolving investor expectations and heightened regulatory scrutiny are converging at a time when management companies and AIFMs are also revisiting their operating models. The challenge isn’t whether to transform; it’s how to balance cost, control, and scalability to elevate the client experience. Against this backdrop, anti‑money laundering and counter‑terrorist financing (AML/CTF) is emerging as a defining test of operating model maturity. Fragmented data, manual workarounds and legacy processes are making it increasingly difficult to demonstrate a robust, risk‑based approach at scale.

A new AML/CTF chapter for Luxembourg asset managers

Insights from recent large‑scale ManCo surveys conducted by KPMG Luxembourg show that most players see their operating model as being in evolution or active transformation, with simplification and cost optimization at the top of the agenda. Yet AML/CTF often lags behind other transformation initiatives.

Several structural factors are behind this:

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Data dependence across the value chain

AML/CTF processes rely on heterogeneous data across products, investors, assets and delegates.

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Distributed accountability

Accountability is spread between management companies, AIFMs, central administrators, depositaries and other service providers.

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Organically grown methodologies and tools

Methodologies and tools have grown organically, resulting in bespoke spreadsheets, complex workflows and inconsistent documentation.

In this context, AML/CTF can become both a source of regulatory risk and a constraint on strategic initiatives such as new product launches, market entries or distribution partnerships. Re‑thinking the AML/CTF operating model is therefore not only a regulatory imperative, but also a prerequisite for competitiveness and sustainable growth.

Re‑thinking the AML/CTF operating model is not only a regulatory imperative, but also a prerequisite for competitiveness and sustainable growth.

From compliance obligation to an AML/CTF 2.0 operating model

An AML/CTF 2.0 operating model is a way of approaching financial crime compliance as a modular, scalable operating block embedded in the wider organization. Rather than treating AML/CTF as a series of discrete tasks, it is designed as an integrated capability that spans policies, data, people, processes and technology.

KPMG Luxembourg’s work with asset managers and asset servicers highlights three complementary levers:

Protect

Elevate regulatory and compliance foundations

Robust AML/CTF frameworks, policies and procedures, ML/TF risk assessments at ManCo/AIFM and fund level, support to ”Responsible du Contrôle” (“RC”) function, and clearly articulated risk‑based controls within Compliance Monitoring Plans.

Enhance

Transform processes and technology

Target operating model design, end‑to‑end process mapping, tool selection and implementation, data cleansing and migration and role‑based training to ensure that data and technology are effectively embedded in day‑to‑day activity.

Outsource

Industrialize through managed services

Managed services for onboarding and ongoing due diligence (KYC/KYA/KYBR), transaction monitoring, sanctions‑related assistance and remediation campaigns, including Build‑Operate‑Transfer arrangements that preserve long‑term flexibility.

Protect Enhance Outsource

Protect

Elevate regulatory and compliance foundations

Robust AML/CTF frameworks, policies and procedures, ML/TF risk assessments at ManCo/AIFM and fund level, support to ”Responsible du Contrôle” (“RC”) function, and clearly articulated risk‑based controls within Compliance Monitoring Plans.

Enhance

Transform processes and technology

Target operating model design, end‑to‑end process mapping, tool selection and implementation, data cleansing and migration and role‑based training to ensure that data and technology are effectively embedded in day‑to‑day activity.

Outsource

Industrialize through managed services

Managed services for onboarding and ongoing due diligence (KYC/KYA/KYBR), transaction monitoring, sanctions‑related assistance and remediation campaigns, including Build‑Operate‑Transfer arrangements that preserve long‑term flexibility.

From burden to building block: Reimagining AML/CTF in Luxembourg asset management

Deployed together, these levers allow institutions to move from reactive remediation to proactive financial crime risk management.

The evolving AML/CTF challenge:

data, models and operating choices

While each institution’s journey is unique, several themes consistently emerge across Luxembourg’s asset management ecosystem:

Data quality and accessibility remain a critical pain point

Client, investor and asset data often reside in multiple systems, with inconsistent formats and limited lineage. This complicates ML/TF risk assessments and makes it harder to apply a genuinely risk‑based approach.
Risk methodologies need to keep pace with regulatory expectations

Many organizations still rely on ad hoc tools for inherent and residual risk scoring, making it difficult to maintain an integrated view across products, investors, distribution channels and delegates.
Fragmented tooling amplifies operational strain

Without integrated case management, workflow and document solutions, it is difficult to orchestrate onboarding, periodic reviews, transaction monitoring and reporting.

Talent and capacity constraints are intensifying

Volume growth, regulatory change and cost pressures are stretching first and second line functions, increasing the risk of backlogs, inconsistent documentation and challenges in evidencing controls.
Insourcing, outsourcing and co‑sourcing decisions must be strategic

Choices about what to keep in‑house, what to delegate and where to leverage managed services have long‑term implications for governance, cost and scalability.

The institutions that address these themes holistically – rather than through isolated fixes – will be best placed to meet regulatory expectations while simplifying complexity.

Digital solutions reshaping AML/CTF in Luxembourg

Digital tools are an essential enabler of an AML/CTF 2.0 operating model, but they need to be grounded in a clear operating model and calibrated to local requirements. Drawing on project experience, KPMG’s specialists have an extensive knowledge of the existing market solutions.

KPMG Luxembourg has also developed a suite of digital tools and accelerators specifically for Luxembourg’s AML/CTF ecosystem:

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Know Your Business Relationships (KYBR)

A web‑based workflow and case management solution with a central data repository, designed around Luxembourg AML/CTF requirements and adaptable to all business relationships. KYBR supports onboarding, periodic reviews and remediation campaigns with full audit trails.

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ML/TF Risk Navigator

A minimalist, smart data model focusing on the factors that truly drive inherent risk and control effectiveness at fund level. It generates rich analytics and reporting from a streamlined set of inputs, helping institutions evidence their risk‑based approach.

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KPMG Data Factory and Data Platform

End‑to‑end data and case management capabilities that support extraction, transformation and migration between systems, while orchestrating client‑specific journeys such as KYC remediation, product conversions or client migrations.

In parallel, KPMG Luxembourg and RegTech provider Finologee have joined forces to further digitalize regulatory compliance. Leveraging on combined KPMG’s regulatory and operating model expertise with Finologee’s KYC Manager platform, financial institutions can manage onboarding, lifecycle management and distribution processes through secure, automated workflows operated under a Luxembourg Support PSF license.

Digital tools only deliver their full potential when they are anchored in a clear risk‑based methodology and operating model.

From design to execution and assurance

A credible AML/CTF posture cannot stop at framework design. It needs to be actioned across the organization and evidenced over time.

An AML/CTF 2.0 operating model therefore covers the full lifecycle:

Strategic design

Defining ML/TF risk appetite, risk‑based approaches and scoring methodologies that cover investors, assets, clients and delegates, with clear documentation standards and review frequencies.
Policy and procedure enhancement

Drafting or refining AML/CTF policies, procedures and operating memoranda for delegates, including minimum standards, oversight mechanisms, KPIs and reporting obligations.
Execution at scale

Running remediation and review campaigns for KYC, KYA and KYBR, supported by workflow tools to coordinate document collection, screening, review and validation with four‑eyes controls.

Independent challenge and assurance

Conducting gap analyses, internal audit co‑sourcing and mock inspections against Luxembourg and EU requirements, CSSF expectations and industry good practice, with pragmatic remediation roadmaps.
Targeted reinforcement of first and second line

Providing RC assistance, secondments and support for defining and testing AML/CTF controls within Compliance Monitoring Plans.

This continuum allows boards, RCs and senior management to demonstrate that AML/CTF is managed as a core risk – with clear accountability, traceability and evidence.

Why this matters now

Luxembourg’s position as a leading cross‑border fund center rests on trust: from investors, regulators, distribution partners and the broader market. As expectations around financial crime risk management continue to rise, AML/CTF will remain central to that trust equation.

By approaching AML/CTF as a strategic building block – and making conscious choices about operating models, data and technology – asset managers and servicers can:

reduce operational and regulatory risk
enhance client experience
increase transparency and control over complex value chains
free up capacity for growth initiatives
and ultimately strengthen Luxembourg’s position as a safe and attractive jurisdiction for global capital.

AML/CTF is moving from a back‑office obligation to a visible marker of governance, resilience and trust.

Looking ahead:

Turning AML/CTF 2.0 into a competitive advantage

For many institutions, the next phase will involve connecting the dots between existing initiatives: operating model reviews, digital transformation programs, regulatory change projects and cost‑optimization efforts. AML/CTF sits at the intersection of these agendas.

Exploring an AML/CTF 2.0 approach can help management teams answer some fundamental questions:

What are the critical AML/CTF capabilities we need to own – and where could managed services create more resilience and scalability?
How can we industrialize data and documentation while preserving the judgment that remains essential to AML/CTF?
Which digital tools will unlock the greatest value in our specific context, and how should they be sequenced?

As the EU Anti‑Money Laundering Regulation (AMLR) comes into effect, firms will operate under a single, directly applicable rulebook across the EU, with more consistent supervisory expectations. AMLR will sharpen requirements around customer due diligence, beneficial ownership, group‑wide policies, information sharing, and data quality – raising the bar on data, controls, and cross‑border consistency. Designing AML/CTF 2.0 with AMLR in mind helps organizations anticipate timelines and supervisory focus, align operating models and data architecture accordingly, and reduce the cost of future compliance.

At KPMG Luxembourg, we work with asset managers and asset servicers to co‑design and implement an AML/CTF 2.0 configuration that reflects their risk profile, operating model, and growth ambitions. The goal is not only to meet today’s regulatory expectations, but to build AML/CTF ecosystems that are resilient by design.

Next steps

Whether you are redesigning your AML/CTF operating model, planning a significant remediation campaign, or evaluating RegTech and managed services options, the upcoming AMLR makes this an ideal moment to reassess how AML/CTF fits into your broader transformation agenda.

To discuss how an AML/CTF 2.0 approach could apply to your organization, reach out to KPMG Luxembourg’s AML/CTF and asset management specialists.

Together, we can help you turn AML/CTF into a source of confidence – for your investors, clients, regulators, and stakeholders.