LUXEMBOURG Law and Practice Contributed by: Andreas Heinzmann, Valerio Scollo and Angela Permunian, GSK Stockmann
for the compliance and regulatory needs of the financial sector. These services range from KYC obligations, data management and fraud detection to fund reporting, digital investment services and investor information tools. Luxem - bourg-based fintechs, such as FundsDLT and Tokeny, are also active in the development of blockchain-based market infrastructures. While traditional players in the financial industry, including banks and insurance companies, were initially viewed as competitors to fintech com - panies, today there is a notable shift towards collaboration between these entities in Luxem - bourg. Fintechs working with legacy players offer a wide variety of services, including data analytics, asset management and open bank - ing. By way of example, following EU legisla - tive developments on payment services, several Luxembourg retail banks formed a leading Euro - pean open banking platform, LUXHUB, in 2018. 2.2 Regulatory Regime The regulatory regime applicable to fintech play - ers depends on the business model and activi - ties of the company. • Payment and electronic money institutions – entities providing payment or electronic money services are subject to the Law of 10 November 2009 on payment services, as amended (the Payment Services Law), and accordingly are subject to authorisation by the Financial Sector Supervisory Commis - sion ( Commission de Surveillance du Secteur Financier or CSSF). • Insurtech – entities providing insurance ser - vices are subject to the Law of 7 December 2015 on the insurance sector, as amended, and accordingly are subject to authorisation by the Insurance Commissioner ( Commis- sariat aux Assurances or CAA).
• Fundtech – entities that operate as invest - ment funds or investment fund managers may be subject to several regulations, including the Luxembourg Law of 12 July 2013 on alter - native investment fund managers, the Law of 17 December 2010 on undertakings for collective investment, the Law of 13 February 2007 on specialised investment funds and the Law of 23 July 2016 on reserved alternative investment funds, each as amended. Funds and fund managers are typically authorised by the CSSF. • Regtech – entities that provide certain ser - vices to regulated financial services entities may need to be licensed by the CSSF as support professionals of the financial sector in accordance with the Law of 5 April 1993 on the financial sector, as amended (the Finan - cial Sector Law). • Lending/banking activities – lending on a professional basis would typically require a banking licence in accordance with the Finan - cial Sector Law. Most Luxembourg banks are authorised and supervised by the CSSF, and subject to EU regulations and national legisla - tion. • Alternative lending – entities that provide lending services that do not qualify as banks may fall under the scope of the Financial Sector Law, which requires an entity to be licensed as a professional performing lending operations. Alternatively, an entity may also grant loans in the context of a securitisation transaction under the Luxembourg Law of 22 March 2004 on securitisation, as amended. • Blockchain and virtual assets – entities pro - viding virtual asset services are required to register with the CSSF and are subject to the obligations laid out in the AML Law. However, not all blockchain-related operations would qualify as virtual asset services. In addition, if the relevant assets qualify as financial instru -
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