Luxembourg

Last updated 03/02/2015


CENTRAL AUTHORITY FOR REPORTING

In Luxembourg, the central authority for reporting is the Financial Intelligence Unit (Cellule de renseignement financier) or FIU, established under the direction of the deputy State Public Prosecutor of the Luxembourg District Court (tribunal d’arrondissement de Luxembourg).

Originally under the Law of 12 November 2004 on the fight against money laundering and the financing of terrorism transposing Directive 2001/97/EC of the European Parliament and the Council of 4 December 2001, as amended (Loi modifiée du 12 Novembre 2004 relative à la lutte contre le blanchiment et contre le financement du terrorisme) (the “Law of 12 November 2004”), attorneys were given the option of submitting their information and documents directly to the FIU.

However, since the 27 October 2010 amendment to the Law of 12 November 2004, because of attorney-client confidentiality issues, with respect to disclosing suspicious transactions, lawyers must address to the President of the Law Society (Bâtonnier de l’Ordre des avocats, hereafter theBâtonnier). The Bâtonnier may only assess the lawyer’s compliance with the rules and any derogation therefrom, and must then transmit the information as quickly as possible to the FIU.

Moreover, the Bar Council (Conseil de l’Ordre) may issue internal regulations on anti-money laundering and terrorism financing obligations and attorney monitoring/inspection procedures, particularly the procedures for inspecting the offices of bar members. The Bar Council is vested with powers to inspect bar member offices and demand any information it deems necessary to verify a member’s compliance with his obligations in this area. If a bar member does not comply with his anti-money laundering and terrorism financing obligations, or obstructs the Bar Council’s exercise of its powers related thereto, a bar member is subject to sanctions such as a warning; a reprimand; temporary suspension of his law license; permanent disbarment; and/ or a maximum fine of EUR 250,000.

The FIU is the national authority with exclusive competence to assess and evaluate all other suspicious transaction declarations. The FIU ensures that the Luxembourg District Court dedicates magistrates to the full-time prosecution of money laundering and terrorism financing cases, and provides professionals, as defined in the Law of 12 November 2004, with current information on money laundering and terrorism financing practices and signs to identify suspicious transactions. The FIU works with other relevant national supervisory authorities, authorities of self-regulating professions and professional associations to ensure understanding of anti-money laundering and terrorism financing laws, regulations and recommendations to ensure their proper application and sufficient cooperation with the authorities.


ANTI-MONEY LAUNDERING REGULATOR(S)

The main competence belongs to the Parliament. The government can approve statutory instruments in the form of a Grand-Ducal Regulation (Règlement Grand-Ducal) in some cases, and in particular provide implementing rules (for example, regarding the scope of application and 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 anti-money laundering directive (the « Third Directive ») was implemented by two laws published on 17 July 2008, both of which partially transposed the Third Directive, and the first of which transposed Directives 2005/60/EC and 2006/70/EC (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, de la directive 2006/70/CE de la Commission du 1er août 2006 portant mesures de mise en œuvre de la directive 2005/60/CE  pour ce qui concerne la définition des « personnes politiquement exposées » et les conditions techniques de l’application d’obligations simplifiées de vigilance à l’égard de la clientèle ainsi que de l’exemption du motif d’une activité financière exercée à titre occasionnel ou à une échelle très limitée), which amended :

  • The Law of 12 November 2004, as amended (Loi modifiée du 12 novembre 2004 relative à la lutte contre le blanchiment et contre le financement du terrorisme) (please note that there is no official consolidated version of this law as amended, but the Financial Sector Supervisory Commission (Commission de Surveillance du Secteur Financier, or “CSSF”) has an unofficial consolidated version of the law, the English translation of which is available here);
     
  • The Judicial System Act of 7 Mars 1980, as amended (Loi modifiée du 7 mars 1980 sur l'organisation judiciaire);
     
  • The Financial Sector Act of 5 April 1993, as amended (Loi modifiée du 5 avril 1993 relative au secteur financier) ;
     
  • The Insurance Sector Act of 6 December 1991, as amended (Loi modifiée du 6 décembre 1991 sur le secteur des assurances);
     
  • The Notary Public Act of 9 December 1976, as amended (Loi modifiée du 9 décembre 1976 relative à l'organisation du notariat);
     
  • The Legal Profession Act of 10 August 1991, as amended (Loi modifiée du 10 août 1991 sur la profession d'avocat);
     
  • The Independent Auditors Act of 28 June 1984, as amended (Loi modifiée du 28 juin 1984 portant organisation de la profession de réviseurs d'entreprises); and
     
  • The Chartered Accountants Act of 10 June 1999 (Loi du 10 juin 1999 portant organisation de la profession d'expert-comptable).

The second 2008 Law, that of 17 July 2008 the fight against money laundering and the financing of terrorism (Loi du 17 juillet 2008 relative à la lutte contre le blanchiment et contre le financement du terrorisme), amended:

  • Article 506-1 of the Criminal Code (Code Pénal), and
     
  • The Law of 14 June 2001 (1) approving the Council of Europe Convention on Laundering Search Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism, done in Strasbourg on 8 November 1990 (la Convention du Conseil de l’Europe relative au blanchiment, au dépistage, à la saisie et à la confiscation des produits du crime, faite à Strasbourg, le 8 novembre 1990); (2) amending certain provisions of the Criminal Code ; and (3) amending the Law of 17 March 1992 (1) approving the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances, done in Vienna, 20 December 1988 (Convention des Nations-Unies contre le traffic illicite de stupéfiants et de substances psychotropes, faite à vienne, le 20 décembre 1998); (2) amending and completing the Law of 19 February 1973 on the sale of drugs and the fight against drug addiction (Loi du 19 février 1973 concernant la vente de substances médicamenteuses et la lutte contre la toxicomanie); and (3) amending and completing certain provisions of the criminal procedure code (Code d’instruction criminelle)

(the “2008 Laws”)

The 2008 Laws were published in the Mémorial A No. 106 of 23 July 2008 and entered into force three days later on 26 July 2008.

Moreover, the following instruments, which are still in force, reference the Third Directive:

  • Law of 21 July 2012 (1) approving the Protocol against the Smuggling of Migrants by Land, Air and Sea, signed at Palermo, 12 December 2000, supplementing the UN Convention against Transnational Organized Crime, and (2) amending the (a) Criminal Code; (b) Criminal Procedure Code; and (c) Law of 29 August 2008 on the free movement of people and immigration (Loi du 21 juillet 2012 portant (1) approbation du Protocole contre le trafic illicite de migrants par terre, air et mer, signé à Palerme, le 12 décembre 2000, additionnel à la Convention des Nations Unies contre la criminalité transnationale organisée du 15 novembre 2000, (2) modification du Code Pénal; (3) modification du Code d’instruction criminelle; (4) modification de la loi modifiée du 29 août 2008 sur la libre circulation des personnes et l’immigration); 
     
  • Grand-Ducal Regulation of 21 December 2012 setting a model declaration form for the physical transport of cash entering, transiting or leaving the Grand Duchy of Luxembourg (Règlement grand-ducal du 21 décembre 2012 portant fixation du modèle de formulaire de déclaration de transport physique de l’argent liquid entrant au, transitant par le ou sortant du Grand-Duché de Luxembourg);
     
  • Law of 21 December 2012 transposing Directive 2010/78/EU of the European Parliament and Council of 24 November 2010 amending Directives 98/26/EC, 2002/87/EC, 2003/6/EC, 2003/41/EC, 2003/71/EC, 2004/39/EC, 2004/109/EC, 2005//60/EC, 2006/48/EC, 2006/49/EC and 2009/65/EC in respect of the powers of the European Supervisory Authority (European Banking Authority), European Supervisory Authority (European Insurance and Occupational Pensions Authority) and European Supervisory Authority (European Securities and Markets Authority) and amending the: 1. Insurance Sector Act of 6 December 1991, as amended; 2. Financial Sector Act of 5 April 1993, as amended; 3. Law of 23 December 1998 creating the Financial Sector Supervisory Commission, as amended; 4. Securitization Act of 22 March 2004, as amended; 5. Risk Capital Investment Company Act of 15 June 2004, as amended; 6. Transferable Securities Prospectus Act of 10 July 2005, as amended; 7. the Law of 13 July 2005 on occupational pension institutions in the form of SEPCAVs (société d’épargne-pension à capital variable), pension savings companies with variable capital, and asseps (association d’épargne-pension), pension savings associations, as amended; 8. Law of 9 May 2009 on market abuse, as amended; 9. Law of 13 February 2007on specialized investment funds, as amended; 10. the Law of 13 July 2007 on markets in financial instruments, as amended; 11. Law of 11 January 2008 on transparency obligations of transferable securities issuers, as amended; 12. Law of 10 November 2009 on payment services, as amended; and 13. Law of 17 December 2010 on mutual funds;
     
  • Financial Sector Supervisory Commission (Commission de Surveillance du Secteur Financier, or “CSSF”) Regulation No. 12-02 of 14 December 2012 on the fight against money laundering and terrorism financing (relative à la lutte contre le blanchiment et contre le financement du terrorisme);
     
  • Law of 20 May 2011 transposing (1) Directive 2009/110/CE of the European Parliament and Council of 16 September 2009 on the taking up, pursuit and prudential supervision of the business of electronic money institutions amending Directives 2005/60/CE and 2006/48/CE and repealing Directive 2000/46/CE, and (2) Directive 2009/44/CE of the European Parliament and Council of 6 May 2009 amending Directive 98/26/CE on settlement finality in payment and securities settlement systems and Directive 2002/47/EC on collateral arrangements as regards linked systems and credit claims; and amending the Law of 10 November 2009 on payment services, electronic money establishments and settlement finality in payment and securities settlement systems; the Law of 5 August 2005 on financial collateral agreements; the Law of 12 November 2004 on the fight against money launder and terrorism financing, as amended; the Law of 5 April 1993 on the financial sector, as amended; and, the Law of 23 December 1998 creating the Financial Sector Supervisory Commission, as amended;
     
  • Law of 27 October 2010 reinforcing the anti-money laundering and terrorism financing legal framework; organizing the inspection of the physical transportation of cash entering into, transiting through or leaving the Grand Duchy of Luxembourg; on the implementation of UN Security Council resolutions and EU on bans and restrictive measures regarding finances of certain persons, entities and groups in the context of the fight against terrorism; amending the (1) Criminal Code; (2) Criminal Investigation Code; (3) 7 March 1980 Judiciary Act, as amended; (4) Law of 12 November 2004 on the fight against money laundering and the financing of terrorism, as amended; (5) Law of 19 February 1973 on the sale of drugs and the fight against drug addiction, as amended; (6) Law of 11 April 1985 approving the Convention on the physical protection of nuclear materials, open for signature at Vienna and New York on 3 March 1980, as amended; (7) Law of 31 January 1948 on the regulation of air navigation, as amended; (8) Law of 20 June 2001 on extradition; (9) Law of 17 March 2004 on the European arrest warrant and surrender procedures between EU Member States; (10) Law of 8 August 2000 on international criminal judicial assistance; (11) Law of 23 December 1998 creating the Financial Sector Supervisory Commission, as amended; (12) Finance Act of 5 April 1993, as amended; (13) Insurance Act of 6 December 1991, as amended; (14) 9 December 1976 Notary Act, as amended; (15) 10 August 1991 Legal Profession Act, as amended; (16) 10 June 1999 Accounting Profession Act, as amended; (17) 18 December 2009 Audit Profession Act; (18) Law of 20 April 1977 on the operation of games of chance and betting on sporting events, as amended; (19) Law of 17 March 1992 approving the UN Convention against illicit traffic in narcotic drugs and psychotropic substances, made at Vienna on 20 December 1988, as amended; and (20) Law of 14 June 2001 approving the Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime and on the Financing of Terrorism, made at Strasbourg on 8 November 1980, as amended;
     
  • Law of 10 November 2009 on payment services, electronic money institution and on settlement finality in payment and securities settlement systems, transposing Directive 2007/64/EC of the European Parliament and Council of 13 November 2007 on payment services in the internal market, amending Directives 97/7/EC, 2002/65/EC, 2005/60/EC and 2006/48/EC, and repealing Directive 97/5/EC, amending the laws of (1) 5 April 1993 on the Financial Sector, as amended; (2) 12 November 2004 on the fight against money laundering and the financing of terrorism, as amended; (3) 18 December 2006 on distance financial services; (4) 15 December 2000 on the postal service and postal financial services, as amended; (5) 13 July 2007 on markets in financial instruments; (6) 20 December 2002 on mutual funds, as amended; (7) 23 December 1998 creating the Financial Sector Supervisory Commission, as amended; (8) 23 December 1998 on the monetary status of the Luxembourg Central Bank, as amended; (9) 6 December 1991  Insurance Sector Act; and

Grand-Ducal Regulation of 29 July 2008 establishing the list of third countries imposing equivalent obligations as defined in the Law of 12 November 2004 on the fight against money laundering and against the financing of terrorism, as amended.


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

  • Law of 12 July 2013 amending the Law of 6 December 1991 on the insurance sector, and the Law of 12 November 2004, as amended (Loi du 12 juillet 2013 portant modification de: la loi modifiée du 6 décembre 1991 sur le secteur des assurances, et la loi modifiée du 12 novembre 2004 relative à la lutte contre le blanchiment et contre le financement du terrorisme);
     
  • Law of 12 July 2013 on alternative investment fund managers transposing Directive 2011/61/EU of the European Parliament and Council of 8 June 2011 on alternative investment fund managers and amending Directives 2003/41/EC and 2009/65/EC as well as Regulations (EC) No. 1606/2009 and (UE) No. 1095/2010, and amending, inter alia, the Law of 12 November 2004, as amended (Loi du 12 juillet 2013 relative aux gestionnaires de fonds d’investissements alternatifs et portant transposition de la directive 2011/61/UE du Parlement européen et du Conseil du 8 juin 2011 sur les gestionnaires de fonds d’investissements alternatifs et modifiant les directives 2003/41/CE et 2009/65/CE ainsi que les règlements (CE) no 1060/2009 et (UE) no 1095/2010 ; portant modification, entre autres à la loi modifiée du 12 novembre 2004 relative à la lutte contre le blanchiment et contre le financement du terrorisme);
     
  • Grand-Ducal Regulation of 29 October 2010 implementing the Law of 27 October 2010 on implementation of the UN Security Council resolutions and actions adopted by the EU with financial bans and restrictive measures against certain persons, entities and groups in the fight against the financing of terrorism (Règlement grand-ducal du 29 octobre 2010 portant execution de la loi du 27 octobre 2010 relative à la mise en oeuvre de resolutions du Conseil de Sécurité des Nations Unies et d’actes adoptés par l’Union européenne comportant des interdictions et mesures restrictives en matière financière à l’encontre de certaines personnes, entités et groups dans le cadre de la lutte contre le financement du terrorisme);
     
  • Law of 27 October 2010 reinforcing the anti-money laundering and terrorism financing legal framework; organizing the inspection of the physical transportation of cash entering into, transiting through or leaving the Grand Duchy of Luxembourg cited above (Loi du 27 octobre 2010 portant renforcement du cadre légal en matière de lutte contre le blanchiment et contre le financement du terrorisme; portant organisation des contrôles du transport physique de l’argent liquide entrant au, transitant par ou sortant du Grand-Duché de Luxembourg; relative à la mise en oeuvre de résolutions du Conseil de Sécurité des Nations Unies et d’actes adoptés par l’Union européenne comportant des interdictions et mesures restrictives en matière financière à l’encontre de certaines personnes, entités et groupes dans le cadre de la lutte contre le financement du terrorisme) – Applicable to lawyers;
     
  • Laws of 17 July 2008 transposing Directives 2005/60/EC and 2006/70/EC (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) – Applicable to lawyers;
     
  • Law of 12 November 2004, as amended, on the fight against money laundering and the financing of terrorism transposing Directive 2001/97/EC of the European Parliament and the Council of 4 December 2001, as amended (Loi modifiée du 12 Novembre 2004 relative à la lutte contre le blanchiment et contre le financement du terrorisme) – Applicable to lawyers;
     
  • Law of 13 November 2002 on the establishment of European Lawyers, as amended (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) – Applicable to lawyers;
     
  • Domiciliation of Companies Act of 31 May 1999, as amended (Loi du 31 Mai 1999 régissant la domiciliation des sociétés) – Applicable to lawyers;
     
  • Chartered Accountants Act of 10 June 1999, as amended (Loi du 10 juin 1999 portant organisation de la profession d’expert-comptable);
     
  • Legal Profession Act of 10 August 1991, as amended (Loi modifiée du 10 août 1991 sur la profession d’avocat) - Applicable to lawyers;
     
  • Law on the Establishment of European Lawyers of 29 April 1980, as amended (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) – Applicable to lawyers;
     
  • Judicial System Act of 7 March 1980, as amended (Loi modifiée du 7 Mars 1980 sur l’organisation judiciaire); and
     
  • Articles 506-1 to 506-7 of the Criminal Code, as amended (Code pénal) – 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 the anti-money laundering and terrorism financing legal framework 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), as amended, or are permanently established (Article 6 of the Law on the Establishment of European Lawyers of 13 November 2002, as amended).


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

I. Luxembourg Law Society Circulars and Other Guidance Documentation

  • Internal Regulations – 9 January 2013
  • Internal Regulation Fact Sheet (fiche d’informations) for the 2012-2013 Judicial Year
  • Opinion of 21 September 2010 on Parliamentary Bill No. 6163 on the reinforcement of the AML/FT legal framework
  • Circular No. 1 – 2009/2010 of 22 June 2010 – restating Law Society’s intent to monitor lawyers’ compliance with their AML/FT obligations and inviting them to submit the questionnaire
  • Circular No. 8 – 2008/2009 - AML procedures
  • AML/FT Questionnaire for completion by law firms to monitor their compliance procedures and knowledge of the subject
  • Undated letter from the Bâtonnier referring to Circular No. 7 – 2008/2009 of 23 March 2009
  • Circular No. 7- 2008/2009 of 23 March 2009– notice that the Law Society will be verifying lawyers’ compliance with their AML/FT obligations
  • Circular No. 6 – 2006/2007 of 21 June 2007 – taking a position on the Public Prosecutor’s suspicious transaction report and reminding that lawyers must send the report to the Bâtonnier, not to the Public Prosecutor
  • Undated Explanatory Note on the scope of application of the Law of 12 November 2004, as amended
  • Circular No. 1 – 2005/2006 of 12 October 2005 – reminder that all reporting of suspicious activity must be filtered through the Bâtonnier
  • Circular No. 4 – 2004/2005 of 28 December 2004 – cessation of automatic sending of circulars on information received from Public Presecutor
  • Circular No. 3 – 2004/2005 of 14 December 2004 – general presentation of the obligations under the Law of 12 November 2004, as amended.

The Luxembourg Law Society circulars and other documentation are internal documents available on the Law Society website for Luxembourg lawyers, and are not directly available to third parties.

II. FIU Circulars and Annual Reports

As stated above, in Luxembourg, the district court public prosecutor's office’s Financial Intelligence Unit (Parquet du Tribunal d’Arrondissement de Luxembourg – Cellule de renseignement financier, “CRF” in French or"FIU" in English) regularly issues circular letters. These letters contain recommendations or instructions and help with interpretation of legislation in connection with the fight against money laundering. The FIU also publishes annual reports, and on its French-language website the FIU has model suspicious transaction reports for declaring AML/FT suspicions to the Public Prosecutor and for tracking financial transactions (http://www.justice.public.lu/fr/organisation-justice/ministere-public/parquets-arrondissement/lutte-anti-blanchiment/index.html).

Circulars:

  • 22-10 - 8 November 2010 – on Article 5 (Cooperation requirements with authorities) of the Law of 12 November 2004, as amended.

Annual Reports:

  • 2012 Annual Report – 17 October 2013
  • 2011 Annual Report – September 2012
  • 2010 Annual Report – September  2011
  • 2009 Annual Report – September 2010
  • 2008 Annual Report – July 2009
  • 2007 Annual Report – September 2008
  • 2005 and 2006 Annual Report – May 2007
  • 2003 and 2004 Annual Report – November 2005
  • 2001 and 2002 Annual Report – March 2003

Of note in the FIU’s 2012 Annual Report is the overall increase in suspicious transaction reports, from 828 in 2003 to 11,423 in 2012. Between 2011 and 2012, there was an increase of 34.09% in the reports (from 8,306 to 11,138). For lawyers, the numbers ranged from 0 in 2003 to 18 in 2012. The 18 lawyer reports in 2012 were submitted by 13 lawyers to the Bâtonnier.

Additionally, between 2011 and 2012, the number of anti-money laundering judicial decisions becoming final increased from 50 to 87. And, the number of persons the conviction of money laundering became final increased from 69 to 143 in that period.

III. CSSF Circulars Mentioning Lawyers

While the CSSF does not regulate lawyers, certain CSSF circulars have mentioned lawyers as financial sector professional customers whose professional activities imply holding of third-party funds and third parties who can perform KYC due diligence for financial sector professionals. Circular 05/211 was one such circular which specified the financial sector professional KYC due diligence process.

CSSF Circular 06/263 of 17 October 2006, was addressed to “all professionals of the financial sector subject to the supervision of the CSSF and to whom the law of 12 November 2004 on the fight against money laundering and terrorist financing applies”. In it, the CFFS stated given the removal of Myanmar from the NCCT list, no country remained on the list. Thus, CSSF Circular Nos. 05/212 and 06/250 were repealed, and points 73 to 76 of Circular 05/211 were rendered purposeless. Subsequently, in paragraph 154 of Circular 08/387 of 19 December 2008, the CSSF repealed Circular 05/211 in its entirety. Circular 08/387 was repealed by Circular 13/556 of 16 January 2013 which announced the entry into force of CSSF Regulation No. 12-02 of 14 December 2012 on the fight against money laundering and terrorist financing.


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

Yes. As stated above, the Law Society monitors lawyers’ compliance with their AML/FT obligations.

Additionally, the Bâtonnier receives all information regarding suspected anti-money laundering transactions, supplied by the lawyers, and decides whether to refer the matter to the FIU.


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

According to Article 3 of the Law of 12 November 2004, as amended, lawyers must apply client due diligence measures when:

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

Client due diligence measures must comprise:

  • 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/her identity so that the institution or person covered by this Directive, including lawyers, is satisfied that he/she 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 that 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 proceduresnot only to all new clients but also to existing clients when they become applicable/relevant on a risk-sensitive basis.


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

Yes, pursuant to Article 3(3) ofthe Law of 12 November 2004, as amended, 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?

Yes, according to Article 3-2 of the Law of 12 November 2004, as amended, 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 relationships with politically exposed persons residing in another Member State or in a third country, 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; and
  • conduct enhanced ongoing monitoring of the business relationship.

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

Yes, according to Article 3-1 of the Law of 12 November 2004, as amended, 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 continuously supervised for compliance with those requirements.

Lawyers cannot apply client due diligence measures in respect of listedcompanies 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, as amended,in one or more Member State and listed companies from third countries which are subject to disclosure requirements consistent with EU legislation.


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

Yes, pursuant to Article 3-3 of the Law of 12 November 2004, as amended, lawyers can rely on third parties to meet the requirements of the due diligence. However, this Article provides for several conditions in relation to that third party, and 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 of 12 November 2004, as amended, 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 Bâtonnier where the attorney is enrolled, any facts related to the suspected involvement of money laundering or the financing of terrorism such as the person involved, the transaction’s development, the origin of the funds, the nature, the aim or the terms of the transaction. The Bâtonnier verifies the compliance of the communication with the requirements of the Law of 12 November 2004, as amended. If the legal requirements are met, he/she shall transmit the information received to the FIU (Article 7 of the Law of 12 November 2004, as amended), and
  2. Provide to the State Prosecutor, at his/her 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 legal advice; 
  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 advice 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 of 12 November 2004, as amended, dealing with his professional obligations in terms of the fight against money laundering and terrorism financing is punished by a fine of EUR 1,250 to EUR 1,250,000.


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

 As a general matter, the client attorney privilege is overruled by the provisions of the Law of 12 November 2004, as amended. For example, Article 5(4) provides that “no professional secrecy applies vis-à-vis the financial intelligence unit in respect of” reporting suspicious transactions. However, under Article 7 of the Law of 12 November 2004, as amended (special provisions applicable to lawyers), lawyers are not obligated to report information received from a client in the situations described in the section directly above.


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

Pursuant to Article 5, paragraph 4, of the Law of 12 November 2004, as amended, 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 his secrecy obligations and does not trigger his/her liability. Thus, the issue of criminal and/or civil indemnity would not arise.


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, paragraph 3, and Article 7, paragraph 1, of the Law of 12 November 2004, as amended, 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 Bâtonnier. As stated above, lawyers have a different procedural route (i.e. they must inform the Bâtonnier) due to adherence to rules of client confidentiality (i.e. they cannot simply inform the FIU of the suspicious transaction). They must not give any indication to their client that they have made this disclosure.

When ceasing to give legal advice 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/she informs the Bâtonnier that he/she is doing so.

The penalties for not informing the Bâtonnier are the imposition of a fine ranging from EUR 1,250 to EUR 1,250,000. Lawyers may also face disciplinary action from the Law Society.


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

Yes, according to Article 5, paragraph 3, of the Law of 12 November 2004, as amended, the institutions and persons, including the lawyers, covered by that law, shall not disclose to the client concerned or to other third parties 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 of same to the Bâtonnier.


DESCRIBE ANY RESTRICTIONS ON ACCEPTING A NEW CLIENT.

Under the Law of 12 November 2004, as amended, lawyers must obtain the identities of all clients or the identities of the persons on behalf of which these clients are acting (the “Ultimate Beneficial Owner” or “UBO”). This is carried out by the presentation of proper identification when they first begin 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 carry out the identification formalities once they have become aware that the amount involved exceeds EUR 15,000.

Where there is doubt as to whether a client is acting on its own behalf, a lawyer must take reasonable action to obtain information on the actual identity of the persons on behalf of whom the client is acting.

Lawyers can obtain their clients’ identities 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 a client when it is a financial institution subject to a similar identification obligation.

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

Such additional appropriate measures may include:

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

To preserve as evidence for any potential future investigation into money laundering or the financing of terrorism, lawyers must keep:

  • with respect to a client’s identity, the copy or references of the required documents, for a 5-year period from the termination of the relationship with the client, and
  • with respect to the transactions, the supporting documents and records consisting of original documents or legal copies, for a 5-year period from the execution of the transactions.

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

According to Article 3, paragraph 5, of the Law of 12 November 2004, as amended, 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.

As per Article 3, paragraph 6, of the Law of 12 November 2004, as amended, lawyers must keep the following documents and information for use in any investigation by the competent Luxembourg authorities into, or analysis of, possible money laundering or terrorist financing:

  • in the case of client due diligence, a copy of the references of the evidence required, must be kept for a period of at least five (5) years after the business relationship with their client has ended, and
     
  • 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 Luxembourg legislation for a period of at least five (5) years following the carrying out of the transactions or the end of the business relationship.

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

The Law of 12 November 2004, as amended,requires that the institutions and persons, including lawyers, establishadequate 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 transactions 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?

(a) In a District Court of Luxembourg decision of 8 May 2006, a Luxembourg lawyer was fined EUR 1,250, as well as his court costs, on the basis of the Law of 12 November 2004, as amended, for not having respected the due diligence obligations under that law. No actual money laundering transaction was detected in that case.

The lawyer’s office was searched and it was found that the while the lawyer domiciled companies in his office, no domiciliation contract had been signed. The only contracts signed were those between the lawyer and one of two companies under which the lawyer received a yearly fee for providing his office as registered address to the two companies of the same group which in turn provided registered office services for a maximum of 12 companies.

The lawyer was unable to furnish the identity of the economic beneficiary/beneficiaries of one of the two companies. The search also revealed a handwritten document in which a former employee of the group companies expressed doubt about the veracity of the information provided with respect to one of the 12 companies domiciled at the lawyer’s office, stating that he thought they were “façades”.

The lawyer was charged with violation of the Law of 12 November 2004, as amended, and the Law of 31 May 1999 governing company domiciliation, as amended. The court found the lawyer guilty of violating the domiciliation law from 5 October 2000 forward (the date of the first company transfer of domicile to his office), and guilty of violating the Law of 12 November 2004, as amended, from the date of its entry into force.

The court held that when lawyers assist their clients in the preparation or realization of company domiciliation transactions, they must:

1. obtain the identification of their clients or the persons for whom their clients act;

2. retain copies or references of documents regarding that identification; and

3. continually monitor their clients during the business relationship in proportion to the degree of risk of their client being associated with money laundering or terrorist financing.

The court further held that the Law of 12 November 2004, as amended, does not require proof that a domiciled corporate entity was actually involved in a money-laundering transaction in order to be applicable because its purpose is to prevent such money laundering.

Taking into account that the aim of this law is to prevent such kind of transactions, one must only prove that the lawyer did not take effective “know your client” due diligence measures. The obligation to take such measures applies not only to new clients but also to existing clients throughout the existence of a relationship with domiciled companies. Luxembourg District Court (Tribunal d’Arrondissement de et à Luxembourg, 16ème chambre) decision of 08 May 2006, docket number 1507/2006.

(b) In a 04 May 2010 Luxembourg District Court decision, a Luxembourg notary was fined EUR 5000 for not performing sufficient due diligence with respect to a Cyprus company, in violation of Articles 3 and 9 of the Law of 12 November 2004, as amended. The court held that the notary knowingly did not perform the necessary due diligence to identify the natural person UBO of his client.

The notary had formed a Luxembourg private limited liability company (société à responsabilité limitée), the shareholder of which was a Cypriot company. The notary had been asked to form the company by a Luxembourg law firm, and the Luxembourg law firm sent the notary a beneficial owner form for the Cypriot company, but the notary did not request further information. Later, when the notary had to pass a deed of sale for the Luxembourg company, and he asked the law firm for further information on the UBO, the law firm refused to give him further information, stating that he had not asked for more when he formed the company.

The notary then reported the suspicious transaction to the FIU which investigated the matter and found that the notary had up to that time simply relied on the law firm’s UBO form when, not only did he form the company, but he also passed two capital increase deeds for it.

The court held that a notary forms companies as part of its professional responsibility, thus he failed in his professional duties when he did not perform the sufficient client due diligence.

Luxembourg District Court (Tribunal d’Arrondissement de et à Luxembourg) decision of 04 May 2010, docket number 1600/2010.

(c) In a decision of 2 June 2010, a bank account manager, his superior and a Luxembourg lawyer were convicted of aiding and abetting in the handling of stolen goods (complicité de recel). An encrypted account had been opened to transfer company assets on account to another Luxembourg bank. The client, the wife of the account holder, had requested the account closure, stating that her husband had disappeared and that the money had to be put in a safe place by hiding the assets. An account in the name of an offshore company was thus opened and the funds were transferred by means of a fictitious withdrawal/transfer. The transaction was fictitious because there were not really sufficient funds in the amount of the USD 1.5 million for the transfer, and the transfer instruction was reversed in the bank’s accounting.

The assets were then transferred to an offshore company’s account at another Luxembourg bank. It turned out that the account holder was arrested abroad for a subsidy scam affecting the foreign country.

The court held that the documents for the fictitious withdrawal/transfer constituted forgery in the bank’s accounting books. Thus, pursuant to the decision, it is not necessary for the person committing a crime to have specific knowledge of the crime or misdemeanour at the origin of the assets for there to be aiding and abetting in the handling of stolen goods.

The element of intent on the part of the lawyer was upheld based on the following factors:

  • setting up of a sophisticated structure of offshore shell companies (BVI);
     
  • opening of accounts at various Luxembourg banks, the beneficial owners of which were on an alternating basis three different people;
     
  • assistance given to those handling the stolen goods, in his capacity as lawyer, in the fictitious withdrawal/transfer transaction and when the bank account opening formalities with the bank to which the assets would be fictitiously transferred and withdrawn; and
     
  • the abnormal and secret nature of the transactions.

All three individuals were convicted of aiding and abetting in the handling of stolen goods, and the bankers were also convicted for forgery and use of forged documents and fined. (Reference: FIU 2010 Annual Report – September  2011)

(d) In a 28 June 2011 Luxembourg Court of Appeals decision, a well-known Luxembourg-qualified lawyer was given a 2-year suspended sentence and an 8,000-euro fine for allowing his bank account to be used for transferring money related to international drug trafficking from Switzerland to Ireland between July 1996 and July 1997. He had appealed his lower court conviction of a 3-year suspended sentence and a 1,000-euro fine.

The Luxembourg Court of Appeals found that he knew the origin of the funds and that it was not necessary for the lawyer to know all of the criminal activities and drug trafficking of the persons from whom the funds were transferred, or that he be absolutely certain about those activities. It was sufficient that the he have serious information leading him to believe that the funds came from drug trafficking.

The lawyer had been in contact with the wife of the drug trafficker, who had been in prison in the United States during the previous few months, for the purpose of organizing his defence and the funds were to be used to pay the American lawyers. Five transfers, totalling four million dollars, were made from the Luxembourg lawyer’s account. The funds did not stay long in his account, but were immediately sent to an American lawyer’s Irish bank account.

The Luxembourg lawyer retained nearly USD 50,000 in his account for the services. He denied knowing the origin of the funds, stating that the client had spoken of an inheritance, the client’s wife had signed a declaration stating that the funds did not come from drug trafficking, and the lawyer himself relied solely upon that declaration. The Public Prosecutor asserted that the retained funds were instead a “risk premium” and that the lawyer could not have been unaware of their illicit origin. Both the lower and appeals courts agreed.

The appeals court upheld the lower court’s ruling regarding their application of the Law of 12 November 2004, as amended, stating that unlike the handling of stolen goods (recel), money laundering is a serious offence composed of predicate offenses, such that it was not necessary to decide whether the lawyer had also engaged in the handling of stolen goods.

The lawyer has resigned from the bar.

Luxembourg Court of Appeals (Court d’Appel du Grand-Duché de Luxembourg 5ème chambre) decision of 28 June 2011, docket number 340/11

(e) In a 31 October 2013 decision, the 18th Criminal Chamber of Luxembourg’s District Court imposed a fine of EUR 5000 on a Luxembourg notary for violation of his professional obligations because the notary failed to identify the beneficial owner of a company for which he amended the articles of incorporation.

The notary acknowledged having failed in his duty to identify his clients in 2009, and his lawyer pleaded attenuating circumstances, requesting that the court defer its delivery of the sentence as long as the notary, who had a no criminal record, not commit another such offense.

The notary, who was swamped with work, had judged that the risk of money laundering was practically non-existent, and thus did not identify his clients, but rather relied on the information provided to him by a business finder with whom he had worked for a long time and who he trusted. The strict KYC obligations under Law of 12 November 2004, as amended, do not permit a notary to omit identifying his clients or the origin of the funds coming from them.

The case did not require a magistrate to open an investigation, the matter was heard by the court in a short, 30-minute hearing, after the notary was heard by the criminal police (police judiciaire). The prosecutor requested that a fine of EUR 10,000 be imposed, but the court imposed a fine of half that amount.

Additionally, the lower court validated the prosecutor’s view that the offense the notary committed was a “hidden” offense (infraction clandéstine), one for which the prescription period began to run only when the offense was discovered, the propagation of which would have allowed the prosecutor to bring actions against parties for infractions or omissions committed many years prior.

However, on appeal the Luxembourg Appeals Court acquitted the notary in its 18 June 2014 decision, overturning the lower court ruling and holding that the prescription period for the prosecutor’s claims had run, thus the claims were barred.

At the time the original action was brought, the prescription period was three (3) years. The prescription period has since been extended to five (5) years for infractions committed after 1 January 2010. In this case, the infraction was committed on 15 January 2009, at the client’s general meeting of shareholders. The notary’s lawyer argued that because the prosecutor did not take action against the notary until 31 May 2012, and hear his testimony until 16 June 2012, those claims were barred because the prescription period began to run on 15 January 2009, and ended on 15 January 2012, four and a half months after the first act of prosecution.

The notary’s lawyer also argued that legal certainty requires that the use of the legal construction of a hidden offense must be used sparingly and exclusively for crimes requiring an element of the perpetrator’s intent to hide the infraction. He further argued, and the Appeals Court agreed, that raising his client’s infraction to the level of a hidden offense would distort the nature of the infraction as the notary’s infraction was solely one of omission. While his client was indeed negligent, he did not attempt to hide anything, and the prosecutor should have begun its action against his client earlier.


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?

Luxembourg is a member of the Financial Action Task force (“FATF”). Its evaluation was conducted by the FATF and was adopted as a third mutual evaluation by its Plenary on 19 February 2010. Some of the key findings of the Mutual Evaluation Report (“MER”) concerning obligations of lawyers are listed below:

  • In addition to financial institutions, notaries and lawyers (in the context of certain activities, consistent with FATF recommendations) are among those non-financial businesses and professions which are subject to the AML/CFT preventive mechanism. The shortcomings identified under Recommendations 5, 6 and 8 to 11 in Section 3 of the first of 2008 Laws are thus valid for notaries and lawyers (para. 29, MER Executive Summary) The FATF 6th Follow-Up Report on the Luxembourg MER, dated February 2014, concludes and recommends to the plenary that, while there remain shortcomings concerning enhanced and simplified due diligence, Luxembourg’s overall compliance with Recommendation 5 reaches a level of LC (Largely Compliant), given that the scope of financial institutions subject to the AML/CFT law has been extended to insurance and reinsurance companies and intermediaries conducting lending and surety activities as well as to managers and advisors of collective investment and pension funds.
  • The obligation to report suspicious transactions is not effectively implemented, in light of the very low number of STRs filed (para. 30, MER Executive Summary).
  • All lawyers and notaries have the support of a representative organisation endowed with disciplinary powers, but in all cases the law confines itself to giving them the power to oversee their members’ observance of their AML/CFT obligations, without further specifying their powers (para. 32, MER Executive Summary).
  • As for sanctions all self-regulatory organisations (SROs) have a broad range of disciplinary sanctions available, in addition to the criminal sanction of the AML/CFT Law. However, no sanction has ever been imposed for an AML/CFT violation (para. 32, MER Executive Summary).  This was remedied by the case law mentioned above.
  • The non-binding circulars addressed by the different authorities to non-financial businesses and professions, such as lawyers and notaries have not been updated since the latest amendments to the AML/CFT Law and are often limited to reminding professionals of their legal obligations, without indicating how to comply with them and without considering the risks specific to each profession (para. 32, MER  Executive Summary). This was remedied for lawyers by the Law Society circulars and guidance documentation listed above.
  • In cases of trustees subject to the AML/CFT Law under the heading for lawyers or notaries, there does not seem to be any oversight of the trust and company services they might provide. There is no oversight at all over service providers who are not subject to mechanisms under other headings. As a result, there is nothing to guarantee that information on the beneficial owner is accurate, adequate and up-to-date (para. 35, MER Executive Summary). This finding seems to have been addressed by the Law of 27 October 2010 which provides that lawyers are subject to its provisions while acting as a trust or company service provider.
     
  • The Customer Due Diligence requirements are partially complied with. The obligation to verify the identity of the beneficial owner is not consistent with that of the FATF. There is no obligation to verify whether the customer is acting on behalf of another person and to take all reasonable measures to obtain identification data sufficient to verify the identity of that other person. There has been no analysis of ML/FT risks in Luxembourg (pg. 19, MER Executive Summary, Recommendation 5 (Client due diligence)).
     
  • As discussed above, lawyers must apply enhanced client due diligence measures in cases of politically exposed persons (PEPs) on a risk-sensitive basis. The definition of PEP, however, is not consistent with that of the FATF; not all important public functions and certain direct family members are covered, resulting in Luxembourg’s definition of PEPs is narrower than the FATF’s. The enhanced due diligence obligation with respect to PEPs applies only to those PEPs who reside outside Luxembourg. Therefore the effectiveness of the system is not fully demonstrated (pg. 20, MER Executive Summary, Recommendation 6 (Politically exposed persons)).
     
  • There is no provision for extending the record keeping requirement beyond five (5) years at the request of a competent authority - (pg. 21, MER Executive Summary, Recommendation 10 (Record keeping)).The obligation to provide documents and information in a timely manner to competent authorities applies only to credit and financial institutions and not to lawyers. In addition, DNFBPs including lawyers have no obligation to make documents and information available to the authorities on a timely basis (pg. 22, MER Executive Summary, Recommendation 12 (DNFPB – R.5, 6, 8-11)).

To view the MER Executive Summary (available in English), click here.

To view the full Mutual Evaluation Report (available in French only) click here.

To view the 6th Follow-Up Report on the MER, dated February 2014 (available in English), click here.

Additionally, in response to Recommendation 24 of Gafi’s 40 Recommendations, as amended on 12 February 2012, regarding transparency and beneficial owners, Luxembourg’s Chamber of Deputies currently has before it Bill 6625, deposited on 4 October 2013 by the outgoing finance minister, which would “immobilize” bearer shares and corporate units, requiring them to be deposited with a designated bank or regulated depository, and require the keeping of nominative share and bearer share registers. Bill 6625’s preamble states that the objective of the bill is to adapt Luxembourg legislation to the Gafi and Global Forum on Transparency and Exchange of Information for Tax Purposes’ requirements for bearer share/corporate unit holder identification.

The proposed legislation would not apply to bearer shares traded on a regulated market, but would apply to shares or corporate units issued by investment funds and companies, preparing Luxembourg for its compliance with the American FATCA (Foreign Account Tax Compliance Act) requirements.

The proposed sanctions would be fines ranging from EUR 500 to EUR 125.000. The bill is currently before the Chamber’s Budget and Finance Commission.


 

INFORMATION PROVIDED BY:

Mario Di Stefano

DSM Di Stefano Moyse
Luxembourg.

Web: http://www.dsmlegal.com

E-mail: contact@dsmlegal.com

Tel : +352 262 562 - 1
Fax : +352 262 562 - 2