Belgium Tightens Squeeze on Financial Institutions Over Tax Fraud Compliance Risks

Increased Criminal Liability Risks for Financial Institutions

Financial institutions and other anti-money laundering (AML) obliged entities in Belgium are now facing increased criminal liability risks due to a legislative change that went into effect this month. The amendment to the Belgian Criminal Code eliminates the distinction between “serious” and “ordinary” tax fraud, making it easier for authorities to pursue money laundering charges against financial institutions.

Implications of the New Provision

• Financial institutions and AML-obliged entities in Belgium are now at risk of conviction for money laundering if they fail to prevent or report suspicious transactions related to tax fraud.
• The new provision introduces a safeguard for AML-obliged entities that achieve full compliance with the laws and regulations preventing tax fraud. However, the scope of this exemption is unclear, leaving many questions about what constitutes “compliance” and whether there will be a de minimis threshold in practice.

Expert Warning: Importance of Compliance Framework

Financial institutions must have the right framework in place for preventing money laundering and tax evasion to avoid facing increased criminal liability risks. Investigations or prosecution can already have serious repercussions, making it essential for entities to review their compliance procedures and ensure they are meeting the necessary standards.

Broader Effort to Combat Financial Crime

The Belgian government’s move is part of a broader effort to combat financial crime and protect the integrity of the country’s financial system. As the landscape continues to evolve, financial institutions and AML-obliged entities will need to be vigilant in their efforts to prevent money laundering and tax evasion.

Key Takeaways for Financial Institutions

• Review compliance procedures and ensure they are meeting the necessary standards.
• Be proactive in preventing money laundering and tax evasion to avoid facing increased criminal liability risks and reputational damage.
• The change has significant implications for financial institutions operating in Belgium, particularly those that engage in high-risk activities such as cross-border transactions.