LUXEMBOURG Law and Practice Contributed by: Andreas Heinzmann, Valerio Scollo and Angela Permunian, GSK Stockmann
3. Robo-Advisers 3.1 Requirement for Different Business Models While there are no regulatory requirements in Luxem - bourg tailored specifically for services provided by robo-advisers, providing digital or automated services is, however, subject to the same regulatory require - ments as non-automated financial advisers. Depend - ing on the business model of the robo-adviser, spe - cific licences will be required in accordance with the Financial Sector Law, which implements the relevant provisions of MiFID II into national law. For example, if automated technology is used to pro - vide personal recommendations to a client in respect of transactions relating to financial instruments, such service provider will need to be authorised by the CSSF as an investment adviser. Additionally, the Blockchain IV Law introduced the “control agent”, which is responsible for managing and verifying dema - terialised securities and providing a secure alternative management. Overall, this development can enhance direct distribution models, including robo-advisers. 3.2 Legacy Players’ Implementation of Solutions Introduced by Robo-Advisers In some cases, legacy players are implementing solu - tions introduced by robo-advisers. The Luxembourg bank, Banque et Caisse d’Epargne de l’Etat (BCEE), was the first retail bank in Luxembourg to launch a robo-adviser service called SpeedInvest in 2017, which helps allocate investments into certain funds. Since then, other banks have also introduced invest - ment services based on automated tools, such as Investify and KeyPrivate. 3.3 Issues Relating to Best Execution of Customer Trades In accordance with the rules on best execution, the Financial Sector Law requires robo-advisers and tra - ditional advisers to take sufficient steps when execut - ing orders to obtain the best possible result for their clients. This includes price, costs, speed, likelihood of execution and settlement, size, nature or any other consideration relevant to the execution of the order. However, if the customer has given specific instruc -
The AML Law applies, for instance, to banks, finan - cial institutions, virtual asset service providers, pay - ment institutions and electronic money institutions. In particular, these entities are required to comply with customer due diligence obligations, adequate internal management requirements and co-operation require - ments with the authorities. The CSSF is required to ensure that all the persons subject to its supervision, authorisation or registration comply with the profes - sional AML/CFT obligations and implement a risk- based approach. Accordingly, the CSSF has broad sanctioning powers (see 2.10 Significant Enforce - ment Actions ). In addition, the new AML package sets up the EU Anti-Money Laundering Authority (AMLA) to directly supervise high-risk entities, and mandates CASPs to comply with AML/CFT regulations, banning anony - mous transactions and enhancing transparency in the crypto sector. 2.15 Financial Action Task Force (FATF) Standards Luxembourg is recognised as one of the most pro - gressive jurisdictions in AML/CFT matters. The AML/ CFT rules apply to the majority of financial entities, ensuring compliance with the Financial Action Task Force (FATF) standards. As a member of the FATF, Luxembourg adheres to over 40 FATF Recommenda - tions and, according to the Mutual Evaluation Report 2023, is regarded as having a “solid AML/CFT” frame - work. 2.16 Reverse Solicitation In accordance with the Financial Sector Law, third- country investment providers may rely on reverse solicitation in Luxembourg and are not obliged to establish a branch or obtain authorisation from the CSSF, provided that the services shall be provided: • solely at the initiative of a Luxembourg client; • without any marketing activities; and • not to circumvent the legislation of any member state. In addition, reverse solicitation is specifically targeted at professional investors and should not be consid - ered a method for placing investments or offerings.
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