Overview

Transaction monitoring is a key component of the AML/CFT/CPF framework for Luxembourg regulated entities. Supervisory expectations focus on whether monitoring arrangements are risk-based, proportionate to the institution’s activities, and effective in identifying unusual or potentially suspicious transactions. Transaction monitoring in Luxembourg is not assessed solely on the basis of systems or tools. Supervisory reviews increasingly focus on governance, data quality, alert handling processes, and the ability of institutions to demonstrate that monitoring controls operate effectively in practice.

Discuss transaction monitoring readiness Targeted advisory support for Luxembourg regulated entities

The Luxembourg transaction monitoring environment

Luxembourg’s supervisory approach emphasises the application of a risk-based approach and clear accountability for transaction monitoring arrangements.

Regulated entities are expected to:

• define the scope of transactions subject to monitoring
• ensure monitoring scenarios and rules reflect the risk profile
• maintain clear governance and oversight of monitoring activities
• document rationale for design and calibration choices
• demonstrate effective investigation and escalation processes

Monitoring arrangements must be capable of withstanding supervisory review and inspection.

Common transaction monitoring challenges

Institutions in Luxembourg often face challenges in ensuring that transaction monitoring frameworks remain effective and proportionate over time. These challenges may arise from business growth, product changes, or evolving regulatory expectations.

Typical areas of supervisory focus include:

• adequacy of scenario design and calibration
• data completeness and data quality
• volume and quality of alerts
• consistency of investigations and decision-making
• documentation of monitoring rationale and outcomes

Addressing these challenges requires both technical understanding and strong governance.

Our transaction monitoring services in Luxembourg

We support Luxembourg regulated entities in designing, reviewing, and enhancing transaction monitoring frameworks that are aligned with supervisory expectations and operational realities.

Our services include:

• assessment of transaction monitoring frameworks
• review of monitoring scope and risk coverage
• evaluation of scenarios, rules, and thresholds
• review of alert handling and investigation processes
• support with governance, oversight, and documentation
• assistance with remediation and inspection preparation

Our approach focuses on practical effectiveness rather than theoretical completeness.

Governance, oversight, and escalation

Effective transaction monitoring requires clear governance and defined escalation pathways. Senior management is expected to understand key monitoring metrics, emerging risks, and material issues identified through alerts and investigations. We support institutions in strengthening reporting, management information, and documented challenge to support informed oversight.

Inspection readiness and remediation

Supervisory inspections frequently assess transaction monitoring arrangements in detail, including system design, data inputs, and investigative processes. Institutions must be able to demonstrate both the design rationale and the operational effectiveness of monitoring controls. We assist clients in preparing for inspections, addressing findings, and implementing sustainable remediation measures.

How this service fits within our Anti-Financial Crime offering

Transaction monitoring is closely linked to customer risk assessment, KYC and CDD, suspicious transaction reporting, and broader AML/CFT/CPF governance. This service integrates with our wider Anti-Financial Crime support, which is covered on dedicated service pages.

Contact and next steps

If you are reviewing your transaction monitoring framework, responding to supervisory feedback, or preparing for regulatory inspection, a structured and proportionate approach is essential.

Discuss transaction monitoring readiness Targeted advisory support for Luxembourg regulated entities