Financial Crime World

FINANCING REGULATIONS UPDATE: DEFINITIONS OF KEY TERMS

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The Luxembourg Ministry of Finance has issued a law clarifying the definitions of key terms in financing regulations, effective as of February 2018. This update aims to clarify the scope of financing regulations in Luxembourg and ensure compliance with European Union law.

Definitions

Group

A “group” is defined as any group of undertakings consisting of a parent undertaking, its subsidiaries, and entities in which the parent undertaking or its subsidiaries hold a participation. This definition is in line with Article 22 of Directive 2013/34/EU on annual financial statements, consolidated financial statements, and related reports.

Member State

A “Member State” is defined as:

  • A member state of the European Union
  • States that are contracting parties to the European Economic Area Agreement other than Member States of the European Union
  • Another Member State other than Luxembourg

Third Country

A “third country” refers to any state other than a Member State.

Property

“Property” is defined as:

  • Assets of every kind, whether corporeal or incorporeal, movable or immovable, tangible or intangible
  • Legal documents or instruments in any form, including electronic or digital, evidencing title to or an interest in such assets

Beneficial Owner

The definition of a “beneficial owner” is clarified as:

  • Any natural person who ultimately owns or controls a customer or any natural person on whose behalf a transaction or activity is being conducted
    • In the case of corporate entities:
      • Any natural person who ultimately owns or controls a legal entity through direct or indirect ownership of a sufficient percentage of shares or voting rights
    • If no person under point (i) is identified, or if there is any doubt that the persons identified are the beneficial owners:
      • Any natural person who holds the position of senior managing official

Criteria for determining control through other means include:

  • Direct or indirect right to exercise a dominant influence over a customer
  • Majority of members of administrative, management or supervisory bodies appointed through direct or indirect exercise of voting rights
  • Power to exercise or actual exercise of a dominant influence or control over the customer

Fiduciaries and Trusts

In the case of fiduciaries and trusts, the settlor(s), fiduciaire(s) or trustee(s) are defined as beneficial owners.

Application

These definitions take effect on February 2018 and will apply to all financial transactions conducted after this date. The new definitions aim to ensure compliance with European Union law and clarify the scope of financing regulations in Luxembourg.

FOR FURTHER INFORMATION

For more information on the new definitions, please contact the Ministry of Finance or a qualified financial advisor.