How to comply with article III.7 of CSSF 20/758?

Question

I need to bring my Luxembourg organisation into compliance with article III.7 of CSSF 20/758 (CSSF 20/758). What are the concrete requirements, the sanctions, and how can Luxgap support me?

Accepted Answer

The classic trapCSSF circular 20/758 requires financial sector professionals to control the risk of assets held by third parties (custodians, sub-custodians, counterparties, clearing houses). The trap the CSSF sanctions most often is not the absence of a custodian, but the inability to demonstrate continuous due diligence across the custody chain. Many institutions assess their first-tier custodian at onboarding, then never refresh the analysis of sub-custody, which is precisely where segregation and insolvency risk concentrate.What the CSSF checks during an inspectionThe complete mapping of the custody chain, down to final sub-custodians and local markets with high legal risk.The segregation of client assets from the custodian's own assets and from other clients' assets (omnibus versus segregated accounts).The regular reconciliation between your books, those of the custodian and those of sub-custodians, with documented handling of discrepancies.The periodic assessment of the financial soundness and certifications of third-party custodians (SOC reports, ratings, prudential ratios).The contractual clauses on asset restitution, liability in case of loss and sub-custodian lien rights.The legal risk analysis per jurisdiction, notably client asset protection in the event of local bankruptcy.How Luxgap automates this riskOur Luxgap Custody Chain Monitor makes the sub-custody blind spot impossible by rebuilding, in real time, your entire custody chain down to the last link. The tool connects to your securities systems (SWIFT MT/MX, settlement platforms, custodian extracts) and cross-references these flows with each custodian's SOC 1/SOC 2 reports and public prudential data, without asking your teams to reconstruct a single org chart manually.Automatically maps every custodian, sub-custodian and counterparty as soon as a position or securities movement appears in your SWIFT flows and settlement extracts.Detects segregation breaches by comparing the declared account structure (omnibus versus segregated) with the reality of received statements.Continuously reconciles your books, those of the custodian and sub-custodians, and alerts on any unresolved discrepancy beyond the threshold you set.Calculates a soundness score per custodian by aggregating ratings, prudential ratios and certification validity, with alerts on SOC report expiry.Assesses legal risk per custody jurisdiction using a client-asset protection grid for local insolvency scenarios.Produces a time-stamped, sealed PDF report, admissible before the CSSF, proving your continuous due diligence in line with circular 20/758.Available as a complement to a Luxgap CISO mandate or as a dedicated SaaS module depending on your scope. Request a tailored quote and our teams will prepare a demonstration on your real securities flows, with a free blank audit within 48h to measure your exposure before any engagement.

Chapitre 7 - Risques liés à la conservation d’actifs

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