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Luxembourg

Last updated 11/11/2008

CENTRAL AUTHORITY FOR REPORTING

The President of the Law Society (Bâtonnier de l’Ordre des avocats).

ANTI-MONEY LAUNDERING REGULATOR(S)

The main competence belongs to the Parliament. The government can approve statutory instruments (règlement Grand-Ducal) in some cases (for example, the field of application and the modalities of the simplified due diligence obligations).

HAS THE THIRD EU MONEY LAUNDERING DIRECTIVE BEEN IMPLEMENTED? IF NOT, WHEN IS IT EXPECTED TO BE IMPLEMENTED?

In Luxembourg, the third EU money laundering directive was implemented by the law of 17 July 2008 implementing the directives 2005/60/CE and 2006/70/CE (Loi du 17 Juillet 2008 portant transposition de la directive 2005/60/CE du Parlement européen et du Conseil du 26 octobre 2005 relative à la prévention de l’utilisation du système financier aux fins du blanchiment de capitaux et du financement du terrorisme) (the “New Law”, which modifies :

  • The Judicial System Act of 7 Mars 1980 (Loi modifiée du 7 Mars 1980 sur l'organisation judiciaire);
  • The Financial Sector Act of 5 April 1993 (Loi modifiée du 5 Avril 1993 relative au secteur financier ;
  • The Insurance Sector Act of 6 December 1991 (loi modifiée du 6 Décembre 1991 sur le secteur des assurances);
  • The Notary Public Act of 9 December 1976 (Loi modifiée du 9 Décembre 1976 relative à l'organisation du notariat);
  • The Legal Profession Act of 10 August 1991 (loi modifiée du 10 Août 1991 sur la profession d'avocat);
  • The Registered Auditors Act of 28 June 1984 (loi modifiée du 28 Juin 1984 portant organisation de la profession de réviseurs d'entreprises);
  • The Chartered Accountants Act of 10 June 1999 (loi du 10 Juin 1999 portant organisation de la profession d'expert-comptable).

The New Law was published in the Memorial A n° 106 of 23 July 2008 and has entered into force three days later (on the 26 July 2008).

LIST ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS (FOR EXAMPLE, LAW SOCIETY OR BAR ASSOCIATION GUIDELINES) CURRENTLY IN PLACE.

  • The Circular of the Law Society n° 6 -2006/2007 of 21 June 2007;
  • The Circular of the Law Society n° 3 – 2004/ 2005 of 14 December 2004;
  • The Circular of the Financial Sector Supervision Committee (“Commission de Surveillance du Secteur Financier") (CSSF) n° 05/211 of 13 October 2005.

The public prosecutor's office at the district court of Luxembourg (“Parquet du Tribunal d’Arrondissement de Luxembourg – Cellule de renseignement financier) issues circular letters regularly. These letters contain recommendations or instructions in connection to the fight against money laundering.  

LIST THE LAWS REGARDING ANTI-MONEY LAUNDERING, INDICATING WHICH LAWS ARE APPLICABLE TO LAWYERS.

ARE VISITING LAWYERS SUBJECT TO LOCAL LAWS REGARDING ANTI-MONEY LAUNDERING, AND, IF SO, TO WHAT EXTENT?

Visiting European lawyers are subject to local law regarding anti-money laundering to the same extent as Luxembourg lawyers. This is applicable if they are providing services (article 4 of the Law on the establishment of European lawyers of 29 April 1980, "Loi du 29 avril 1980 réglant l'activité en prestations de service, au Grand-Duché de Luxembourg, des avocats habilités à exercer leurs activités dans un autre Etat membre des Communautés Européennes") or are permanently established (art. 6 of the Law on the establishment of the European lawyers of 13 November 2002, "Loi du 13 novembre 2002 portant transposition en droit luxembourgeois de la Directive 98/5/CE du Parlement Européen et du Conseil du 16 février 1998 visant à faciliter l’exercice permanent de la profession d’avocat dans un Etat membre autre que celui où la qualification a été acquise").

LIST ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS (FOR EXAMPLE, LAW SOCIETY OR BAR ASSOCIATION GUIDELINES) CURRENTLY IN PLACE.

  • The Circular of the Law Society n° 6 -2006/2007 of 21 June 2007;
  • The Circular of the Law Society n° 3 – 2004/ 2005 of 14 December 2004;
  • The Circular of the Financial Sector Supervision Committee (“Commission de Surveillance du Secteur Financier") (CSSF) n° 05/211 of 13 October 2005.

In Luxembourg, the public prosecutor's office at the district court of Luxembourg (“Parquet du Tribunal d’Arrondissement de Luxembourg – Cellule de renseignement financier) issues circular letters regularly. These letters contain recommendations or instructions and help the interpretation of the legislation in connection to the fight against money laundering.

IS THE LAW SOCIETY/BAR ASSOCIATION INVOLVED IN SUPERVISING OR ENFORCING COMPLIANCE WITH ANTI-MONEY LAUNDERING REGULATIONS?

Yes. The President of the Law Society ("Bâtonnier") receives all information regarding suspected anti-money laundering transactions, supplied by the lawyers, and decides whether or not to pursue the matter further i.e. prosecute the offending individuals or companies.

DESCRIBE CLIENT DUE DILIGENCE REQUIREMENTS, INCLUDING WHEN IT MUST BE UNDERTAKEN BY LAWYERS.

According to article 3 of the New Law of 17 July 2008, lawyers must apply client due diligence measures in the following situations:

  • When establishing a business relationship;
  • When carrying out occasional transactions amounting to EUR 15 000 or more, whether the transactions are carried out in a single operation or in several operations which appear to be linked;
  • When there is a suspicion of money laundering or terrorist financing, regardless of any derogation, exemption or threshold;
  • When there are doubts about the veracity or adequacy of previously obtained client identification data.

Client due diligence measures must comprise of:

  • Identifying the client and verifying the client’s identity on the basis of documents, data or information obtained from a reliable and independent source;
  • Identifying, where applicable, the beneficial owner and taking risk-based and adequate measures to verify his identity so that the institution or person covered by this Directive is satisfied that it Knows who the beneficial owner is, including, as regard legal persons, trusts and similar legal arrangements, taking risk-based and adequate measures to understand the ownership and control structure of the client;
  • Obtaining information on the purpose and intended nature of the business relationship;
  • Conducting ongoing monitoring of the business relationship including scrutiny of transactions being conducted are consistent with the institution’s or person’s knowledge of the client, the business and risk profile, including, where necessary, the source of funds and ensuring that the documents, data or information held are kept up-to-date.

The verification of a client’s identity and the identity of the beneficial owner must take place before the establishment of a business relationship or the carrying-out of any transactions. However it is possible for the verification of a client’s identity and the identity of the beneficial owner to be completed during the establishment of a business relationship if the normal conduct of business cannot be interrupted or where there is little risk of money laundering or terrorist financing occurring. In such situations client due diligence measures must be completed as soon as practicable after the initial contact.

Lawyers must apply the client due diligence procedures not only to all new clients but also at appropriate times to existing clients on a risk-sensitive basis.

DOES YOUR COUNTRY FOLLOW A RISK-BASED APPROACH TO CLIENT DUE DILIGENCE BY LAWYERS?

According to article 3(3) of the New Law, lawyers must apply each of the client due diligence requirements, but may determine the extent of such measures on a risk-sensitive basis depending on the type of client, business relationship, product or transaction. Lawyers must however, be able to demonstrate that the extent of the measures is appropriate in view of the risks of money laundering and terrorist financing.

ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS?

According to article 3(2) of the New Law, lawyers must apply on a risk-sensitive basis, enhanced client due diligence measures, in situations which by their nature can present a higher risk of money laundering or terrorist financing, and in other situations representing a high risk of money laundering or terrorist financing.

In respect of transactions or business relationship with politically exposed persons residing in another Member State or in a third country, the lawyers must:

  • Have appropriate risk-based procedures to determine whether the client is a politically exposed person;
  • Have senior management approval for establishing business relationships with such clients;
  • Take adequate measures to establish the source of wealth and source of funds that are involved in the business relationship or transaction;
  • Conduct enhanced ongoing monitoring of the business relationship.

ARE THERE SIMPLIFIED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, LISTED COMPANIES?

According to article 3(1) of the New Law there are simplified due diligence measures where the client is a credit or financial institution covered by the Directive 2005/60/EC, or a credit or financial institution situated in a third country which imposes requirements equivalent to those laid down in the Directive 2005/60/EC and is being continuingly supervised for compliance with those requirements.

Lawyers cannot apply client due diligence measures in respect of listed companies whose securities are admitted to trading on a regulated market within the meaning of article 1, paragraph 11 of the Law of 13 July 2007 on markets in financial instruments in one or more Member State and listed companies from third countries which are subject to disclosure requirements consistent with Community legislation.

ARE LAWYERS PERMITTED TO RELY ON THIRD PARTY DUE DILIGENCE? IF YES, PLEASE DESCRIBE.

The lawyers can rely on third parties to meet the requirements of the due diligence. However, the ultimate responsibility for meeting those requirements shall remain with the institution or person which relies on the third party.

Third parties shall make information requested immediately available to the institution or person to which the client is being referred. Relevant copies of identification and verification data and other relevant documentation on the identity of the client or the beneficial owner shall immediately be forwarded, on request, by the third party to the institution or person to which the client is being referred

WHEN IS A LAWYER UNDER AN OBLIGATION TO REPORT SUSPICIOUS TRANSACTIONS?

Luxembourg attorneys, when assisting or acting on behalf of a client in a case covered by the Law (contrast with the third question), shall fully co-operate with the Luxembourg authorities in charge of the fight against money laundering and against the financing of terrorism.

Luxembourg attorneys must:

  1. Report to the President (Bâtonnier) of the Law Society where the attorney has been enrolled, any facts related to the suspected involvement of money laundering or the financing of terrorism such as the person involved, its evolution, the origin of the funds, the nature, the aim or the terms of the transaction; The President of the Law Society verifies the compliance of the communication with the terms of the Law. If the legal requirements are met, he/she shall transmit the information received to the State Prosecutor at the District Court of Luxembourg (Tribunal d’arrondissement)
  2. Provide to the State Prosecutor, at his request, all the information necessary pursuant to the procedure provided for by the applicable legislation.

Luxembourg attorneys have no obligation to report where the information was received from the client while:

  1. Providing a legal advise; or
  2. Evaluating the legal situation of the client; or
  3. Exercising their mission of defence or of representation of the client in a judicial proceeding or concerning such proceeding, including advises relating to the way to engage or avoid a proceeding, such information being received or obtained prior to or during or after the proceeding.

The intentional violation by a Luxembourg attorney of any provision of the Law dealing with its professional obligations in terms of fight against money laundering and terrorism financing is punished by a fine of EUR 1,250.- to EUR 125,000.

DOES ATTORNEY/CLIENT PRIVILEGE AND/OR DUTIES OF CONFIDENTIALITY PROVIDE A DEFENCE OR PARTIAL/TOTAL EXCEPTION TO THE REQUIREMENT TO REPORT SUSPICIOUS TRANSACTIONS?

The disclosure in good faith by a lawyer of confidential information to the Luxembourg authorities in charge of the fight against money laundering and the financing of terrorism does not constitute a violation of its secrecy obligations and does not trigger its responsibility; also the client attorney privilege is overruled by the provisions of the law.

DOES LOCAL LAW PROVIDE ANY CRIMINAL AND/OR CIVIL INDEMNITY TO A LAWYER WHO HAS REPORTED A SUSPICIOUS TRANSACTION?

There is no indemnity allowed to a lawyer in this situation.

ONCE A SUSPICIOUS TRANSACTION REPORT HAS BEEN FILED, IS A LAWYER ALLOWED TO PROCEED WITH THE LEGAL ADVICE/TRANSACTION, AND, IF SO, MUST CONSENT FROM AUTHORITIES BE OBTAINED FIRST?

According to article 5 (3) and article 7 (1) of the New Law, lawyers must refrain from carrying out transactions which they know or suspect to be related to money laundering or terrorist financing until they have informed and received consent to proceed from the President of the Law Society (Bâtonnier). Lawyers have a different procedural route (i.e. they must inform the President of the Law Society (Bâtonnier)) due to adherence to rules of client confidentiality. (i.e. they cannot simply inform the prosecutors). He must not give any indication to his client that he has made this disclosure.

Where ceasing the legal advise given to a suspected individual or ceasing the suspected transaction will jeopardise or frustrate the future efforts of the prosecutor in tracing the beneficiaries of the suspected money laundering or terrorist financing operation, the lawyer may continue to advise the suspected individual or continue to carry out the transaction, as long as he informs the President of the Law Society (Bâtonnier) that he is doing so.

The penalties for not informing the President of the Law Society (Bâtonnier) are the imposition of a fine between EUR 1,250 and EUR 125,000. Lawyers may also face disciplinary action from the Law Society.

IS THERE A TIPPING-OFF PROHIBITION? IF YES, PLEASE DESCRIBE.

According to article 5 (3) of the Law of 17 July 2008, the institutions and persons, including the lawyers, covered by the Law, shall not disclose to the client concerned or to other third persons the fact that information has been transmitted or that a money laundering or terrorist financing investigation is being or may be carried out. The prohibition shall not prevent disclosure to the President of the Law Society.

DESCRIBE ANY RESTRICTIONS ON ACCEPTING A NEW CLIENT.

Under the Law, lawyers must obtain the identities of all clients or the identities of the persons on behalf of which these clients are acting. This is carried out by the presentation of a proper identification while they first start the relationship and in particular where the transaction exceeds EUR 15,000.- If the amount is not known at the beginning of the transaction, attorneys shall proceed to the identification once they have become aware of the amount involved.

Where there is a doubt on whether the client is acting for its own account or not, the lawyer must take reasonable actions to obtain information on the actual identity of the persons on behalf of whom the clients are acting.

Lawyers can proceed with the identification even if the amount of the transaction is below EUR 15,000.- whenever they suspect money laundering or the financing of terrorism.
A lawyer need not identify the client when it is a financial institution submitted to a similar identification obligation.

When their client is not physically present for the identification, a lawyer must take some specific and appropriate measures to face the higher risks existing in terms of money laundering and financing of the terrorism.

Such additional appropriate measures may either include:

  • Take additional measures of verification; or
  • Request the client to provide additional documents, or notarized documents or certificates of confirmation from financial institutions; or
  • Request that the first payment of the operation be executed from an account opened under the client name in a credit institution submitted to a similar identification obligation.

In order to serve as evidence in any investigation on money laundering or the financing of terrorism, lawyers must keep:

  • With respect to the identification, the copy or the references of the required documents, during a 5-year period as from the termination of the relationship with the client;
  • With respect to the transactions, the justificatory documents and records consisting of original documents or legal copies, during a 5-year period as from the execution of the transactions

ARE THERE ONGOING MONITORING REQUIREMENTS FOR EXISTING CLIENTS? IF YES, PLEASE DESCRIBE.

According to article 9(6) of the New Law lawyers must apply the client due diligence procedures not only to all new clients but also at appropriate times to existing clients on a risk-sensitive basis.

Lawyers must keep the following documents and information for use in any investigation into, or analysis of, possible money laundering or terrorist financing by the competent Luxemburgish authorities:

  • In the case of the client due diligence, a copy of the references of the evidence required, for a period of at least five years after the business relationship with their client has ended;
  • In the case of business relationships and transactions, the supporting evidence and records, consisting of the original documents or copies admissible in court proceedings under the applicable Luxemburgish legislation for a period of at least five years following the carrying-out of the transactions or the end of the business relationship (article 3, paragraph 6 of the Law on anti-money laundering).

DESCRIBE ANY OTHER WAYS IN WHICH LAWYERS ARE AFFECTED BY ANTI-MONEY LAUNDERING LEGISLATION.

The New Law requires that the institutions and persons, including lawyers, establish adequate and appropriate policies and procedures of client due diligence, reporting, record keeping, internal controls, risk assessments, risk management, compliance management and communication in order to foresee and prevent operations related to money laundering or terrorist financing.

HAVE LAWYERS IN YOUR JURISDICTION BEEN IMPLICATED IN MONEY LAUNDERING, INCLUDING ANY TYPE OF COMPLAINT, ARREST OR PROSECUTION?

In a decision of 8th May 2006, a Luxembourg lawyer was fined on the basis of the law of 2004 for not having respected the due diligence obligations as provided for the law of 2004. No actual money laundering operation was detected in this case.

The District Court of Luxembourg (Tribunal d'arrondissement de Luxembourg," 16e Chambre) has found, in the criminal case against the lawyer, who provided domiciliation services to corporate entities, that the sanction of an infringement of the obligations laid down by the Law of 12 November 2004, does not require the proof that a domiciled corporate entity was actually involved in a money-laundering operation.

Taken into account that the aim of this law is to prevent such kind of operations, it is only required to prove that the “know your client” due diligence measures have not been respected by the lawyer. These obligations concern not only new clients but also the existing clients throughout the existence of the relationship with the domiciled companies.

HAS THE FINANCIAL ACTION TASK FORCE (FATF) CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?

At the present there is no mutual evaluation report of Luxembourg by the FATF.

Information provided by:
Mario Di Stefano
DSM Di Stefano Sedlo Moyse
Luxembourg.
Web: http://www.mds-legal.com
e-mail: contact@mds-legal.com
Tel. : +352 262 562 - 1
Fax : +352 262 562 - 2

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