Financial Crime World

Banking Secrecy: Luxembourg Residents to Enjoy Until End of 2022, Belgians’ Accounts to be Disclosed by January

EU Tax Authorities’ Automatic Exchange of Information Takes Effect

While tax authorities in Belgium will gain access to the balances of bank accounts, life insurance policies, and stock market shares of residents held within the country as of January 31, taxpayers resident in Luxembourg will continue to benefit from banking secrecy until December 31, 2022. This disparity arises from the principle of automatic exchange of information between European tax administrations on bank accounts held by non-resident taxpayers, adopted in 2013 and coming into force in 2016.

Banking Secrecy: A Thing of the Past

The concept of professional secrecy, formerly known as banking secrecy, allowed bankers to refuse providing information to authorities on request, subject to investigations duly authorized by judicial authorities. However, with the introduction of the fifth anti-money laundering directive and subsequent directives, this secrecy has gradually eroded.

DAC7: A New Era for Tax Cooperation

The latest directive on administrative cooperation in the field of taxation (DAC7) provides for access to the register of bank accounts to be given to tax authorities. This means that Belgian tax authorities will have access to the balances of their clients’ assets, while Luxembourg’s finance ministry plans to transpose DAC7 by January 1, 2023.

Modality and Data Processing

According to a spokesperson from the finance ministry, “the modalities relating to access to the Luxembourg bank account register and the processing of data by the Luxembourg tax authorities in this context have yet to be defined.”

The Fight Against Money Laundering and Terrorism Financing

Even before 2016, the concept of banking secrecy began to erode with the introduction of more precise provisions on knowing your customer (KYC) aimed at combating money laundering and the financing of terrorism. This led to “non-compliant” customers being banned, and over time, questions became more precise regarding the identity of clients, their origin, domicile, as well as the origin of funds deposited in Luxembourg.

The New Norm

Today, it is standard practice for customers to answer these questions, effectively ending the era of banking secrecy. While this change may seem daunting, it marks a significant step forward in combating financial crimes and ensuring greater transparency in the financial sector.