CSSF enforcement decisions are not only about the sanctioned institution; they are signals to the wider market.
The CSSF’s decision concerning Rakuten Europe Bank S.A. highlights persistent AML/CFT control weaknesses, including delayed remediation of known issues, ineffective transaction monitoring, alert backlogs and shortcomings in suspicious activity reporting. While the case relates to a credit institution, the underlying governance failures are highly relevant to Luxembourg investment funds and their management companies.
In the Luxembourg investment funds environment, a company secretary (CoSec) can act as a governance “control tower”, helping boards ensure that AML/CFT weaknesses—like those identified in the Rakuten Europe Bank case—are escalated, tracked and remediated in a timely manner. By structuring agendas, minutes, action logs and follow-up reporting, the CoSec supports directors and senior management in converting AML/CFT concerns into concrete, monitored actions across the fund structure and its service providers.
Parallels with the Rakuten case
The CSSF’s sanction against Rakuten Europe Bank highlights failures that are structurally similar to risks faced in the funds sector: outdated monitoring tools, large backlogs of alerts, delayed reporting to the FIU and incomplete or insufficiently updated risk assessments. Investment fund managers and IFMs similarly rely on transaction monitoring, name screening and risk scoring—often delegated to administrators, transfer agents or other service providers. Persistent delays or tool obsolescence at delegate level can therefore create comparable deficiencies at fund level if not robustly governed.
In both banking and funds, the CSSF expects professionals to operate systems that cover all relevant transactions, allow the “without delay” application of restrictive measures, and enable prompt action when suspicious indicators arise. Where a bank failed to implement corrective measures years after issues had already been identified by another authority, a fund group could face similar criticism if a board repeatedly notes AML control gaps at a delegate but does not ensure timely remediation and effective oversight.
The CoSec’s role in AML/CFT governance
In Luxembourg funds, the CoSec typically supports boards and management of UCITS and AIF structures by organising meetings, maintaining corporate records, monitoring regulatory developments and coordinating interactions with regulators. This position places the CoSec at the centre of the governance framework, with a practical role in embedding AML/CFT topics into the regular decision-making cycle—even where formal AML responsibilities sit with the MLRO/RC, compliance function and external service providers.
Key contributions include:
Structuring board agendas so AML/CFT, sanctions and screening are standing items rather than ad-hoc discussion points.
Ensuring MLRO/RC reports, administrator and transfer agent AML dashboards, and audit or regulatory findings are circulated sufficiently in advance to allow meaningful challenge.
Maintaining a clear and auditable trail of decisions, challenges and follow-ups in board minutes and written resolutions, including documented rationales where risks are accepted.
Action list management and follow-up
Using the Rakuten case as a reference point, an effective CoSec can translate board discussions into a monitored remediation plan for an IFM or fund. A governance narrative in which directors are aware of the CSSF’s sanctions, assess their relevance and then rely on the CoSec to drive the resulting action list is fully aligned with best-practice expectations.
Typical CoSec activities include:
Documenting precise actions (for example: “Implement updated transaction-monitoring scenarios covering all fund share transactions and distributions by Q3”), with clear owners and deadlines.
Tracking dependencies such as vendor upgrades, IT resources or external AML reviews, and escalating delays to the next board or extraordinary meeting.
Requesting written status updates from action owners and consolidating them into concise progress reports for the board and, where relevant, for regulators or depositaries.
Preventing “Rakuten-type” weaknesses in funds
By focusing on recurring issues highlighted by the sanction, a CoSec can help fund boards avoid similar long-running weaknesses in their own AML/CFT frameworks. The objective is not to replace the MLRO/RC, but to ensure that governance structures prevent known issues from remaining unresolved over extended periods.
Examples of preventive contributions include:
Transaction and investor monitoring: prompting periodic board review of whether AML tools used by the fund and its delegates are up-to-date, fully scoped and adequately tested, with evidence of remediation where controls fail.
Alert backlogs and FIU reporting: ensuring that metrics on sanctions, PEP and adverse-media backlogs, as well as FIU reporting timeliness, are reported regularly, with threshold breaches automatically triggering board-level actions.
Risk assessment completeness: challenging whether investor, beneficial owner and country risks, distribution channels and product risks are fully captured in AML risk assessments at both fund and IFM level.
Board meetings and extraordinary governance responses
A significant CSSF sanction in the banking sector may justify an extraordinary board meeting of an investment fund or IFM to assess whether similar weaknesses could exist within its own setup. The CoSec’s role is to operationalise that governance response into a structured and documented process.
Typical steps include:
Convening the extraordinary meeting and ensuring participation by key stakeholders (MLRO/RC, compliance, administrator or transfer agent, depositary and, where appropriate, an external AML adviser).
Preparing a comparative note summarising the CSSF’s findings and mapping them against the fund’s operating model (transaction monitoring, screening, risk scoring and reporting responsibilities).
Issuing post-meeting minutes and an integrated corrective-action tracker that aligns new actions with existing audit or regulatory recommendations, ensuring accountability across entities and functions.
Handled in this way, the CoSec becomes a keystone of AML/CFT governance for Luxembourg investment funds—ensuring that regulatory lessons are internalised and that management’s commitments to the CSSF are supported by disciplined execution, documentation and ongoing oversight.
