Financial Crime World

Luxembourg’s Stricter Anti-Money Laundering Laws: Understanding the “Material Element” and “Moral Element”

Luxembourg has implemented stricter anti-money laundering (AML) laws, requiring a “material element” and “moral element” to prove that criminal offenses have been committed. In this article, we will explore these concepts and their implications for professionals.

The Material Element

The material element refers to the proof of the constitutive elements of the criminal offense, as described in the Criminal Code. This includes the actions or omissions that constitute the offense, such as the fraudulent use of a financial instrument.

The Moral Element

The moral element is akin to intent and corresponds to the awareness and willingness with which the offense was committed. This element is critical in determining whether an individual has intentionally engaged in illegal activities or acted recklessly.

Predicate Offenses: A Wide Range of Offenses

Luxembourg’s Criminal Code lists a wide range of predicate offenses that can trigger money laundering investigations, including:

  • Aggravated tax fraud
  • Tax evasion
  • Other financial crimes

The CSSF has published a circular on the application of AML laws to predicate tax offenses, providing risk factors to help professionals identify potential laundering of predicate tax offenses.

Reporting Offenses: Failure to Disclose and Tipping-Off

Professionals subject to AML laws are required to:

  • Inform the Financial Intelligence Unit (FIU) if they know or suspect that money laundering, a predicate offense, or terrorism financing has been committed
  • Prohibit tipping off customers about ongoing investigations

Limitations on Activities: No Thresholds

The AML Law does not have any thresholds under which breaches of the law will not be investigated or sanctioned. Failure to comply with the law can occur without executing a transaction, and professionals must:

  • Establish and implement AML policies and procedures
  • Apply customer due diligence
  • Retain customer documentation

Compliance Program: Regulatory Requirement

The AML Law requires professionals to implement a compliance program that includes:

  • Internal policies, controls, and procedures to mitigate and manage risks of money laundering and terrorist financing
  • Model risk management methods
  • Customer due diligence
  • Cooperation with authorities
  • Record-keeping
  • Employee screening

Customer Due Diligence Requirements

Professionals are required to conduct customer due diligence measures, including:

  • Identifying customers and verifying their identity
  • Assessing the purpose and nature of the business relationship
  • Conducting ongoing due diligence

Simplified or enhanced due diligence requirements apply for certain types of persons and activities.

Conclusion

In conclusion, Luxembourg’s AML laws require professionals to implement a comprehensive compliance program that includes strict customer due diligence measures and reporting requirements to combat money laundering and terrorist financing. It is essential for professionals to understand the material element and moral element of criminal offenses, as well as the predicate offenses, reporting requirements, limitations on activities, and compliance program requirements to ensure effective implementation of AML laws.