Jean-Noel Lequeue (JNL): Compliance, Costs, and Competitiveness

How is compliance evolving in Luxembourg today?

The compliance function in Luxembourg is evolving positively. First, it is now recognized for its true value, even though it has only been part of Luxembourg law for about ten years. It has also become considerably more professional, thanks in particular to training programs and the work of the ALCO (Luxembourg Association of Compliance Officers), whose working groups produce documents made available to all members. What we’re also seeing is an explosion in responsibilities and needs. Teams are growing, and salaries have risen sharply, but this rapid growth has an unintended consequence: the more staff there are, the harder it becomes to pass on skills to younger employees. There is a real risk that the very quality of the role will be diluted, at a time when its demands have never been higher. In the event of a serious breach—particularly regarding anti-money laundering—the personal consequences for the compliance officer can be very severe.

What risks and opportunities do you see for Luxembourg?

The regulatory burden has grown exponentially over the past decade, with no sign of slowing down. For large organizations, these costs are easily absorbed and even become a selling point. For SMEs in the financial sector—such as asset management firms or investment firms—the situation is quite different: resources are more limited, and the regulatory burden weighs proportionally much heavier. In fact, many of these smaller firms are merging to pool costs they can no longer bear on their own. The result is reduced competition, a shrinking range of services, and rising fees. Despite these risks, opportunities do exist, and the most significant one lies in technological advancements. Artificial intelligence and blockchain have the potential to profoundly transform certain segments of the sector, particularly in the world of funds. Claude Marx himself has stated that he does not understand why AI is not used more extensively in the fight against money laundering. I share this view, and I would add that the CSSF would be well advised to incorporate it into the processing of authorization applications, where delays and a lack of visibility remain a real source of frustration for market participants.

I won’t understand why the CSSF doesn’t also use artificial intelligence for authorization applications.

You mentioned a dream before the interview—can you share it?

It’s the dream of a comprehensive audit, conducted by a fully independent body. The Court of Auditors strikes me as the ideal body: it has the independence and powers necessary to carry out such work without a conflict of interest. The goal would be to assess the regulatory complexity as a whole and identify horizontal and vertical redundancies that place an unnecessary burden on the sector. Horizontal redundancy refers to the fact that all parties involved with the same client repeat the same anti-money laundering procedures. Vertical redundancy involves a layered system of first-level controls, compliance, internal audit, external auditors, the CSSF, and European regulation. All of this comes at an enormous cost for an effectiveness that, if I may say so, remains relative. The fund industry accounts for 80% of the country’s corporate taxes. We cannot afford to let our competitiveness erode without taking action. Some recent developments announced by the Ministry of Finance are a step in the right direction, but there is still a long way to go.