Financial Crime World

Luxembourg Law Requires “Material Element” and “Moral Element” for Criminal Offences

In Luxembourg, the law requires a “material element” and a “moral element” to prove criminal offences. The material element refers to proof that the constitutive elements of the criminal offence, as described in the Criminal Code, have been met. The moral element, akin to intent, corresponds to the awareness and willingness with which the offense was committed.

Predicate Offences

Luxembourg’s money laundering laws are tied to predicate offences listed in Article 506-1 of the Luxembourg Criminal Code. This article includes a wide range of offences, including:

  • Tax evasion
  • Aggravated tax fraud
  • Tax evasion committed abroad

A catch-all provision covers any other offence punishable by a custodial sentence of at least six months.

In December 2016, Luxembourg introduced tax-related offences as predicate offences, including aggravated tax fraud and tax evasion committed abroad. A circular published by the Commission de Surveillance du Secteur Financier (CSSF) provides guidance on identifying risk factors for laundering predicate tax offences.

Reporting Offences

Under the Anti-Money Laundering Law, professionals subject to the law are required to inform the Financial Intelligence Unit (FIU) when they know or suspect that:

  • Money laundering has been committed
  • A predicate offence has been committed
  • Terrorism financing has been committed

Professionals and their employees are also prohibited from tipping off customers about investigations.

The Luxembourg Criminal Code includes specific offences related to obstruction of justice, such as:

  • Altering or falsifying evidence
  • Destroying documents
  • Concealing objects likely to facilitate the discovery of an offence

Thresholds and Restrictions

There are no thresholds under which a breach of the AML Law will not be investigated or sanctioned. However, certain professionals may be excluded from the scope of application if they conduct transactions below a certain value, such as:

  • EUR 10,000 for cash transactions

Additionally, there are exceptions for:

  • Occasional transactions
  • Transfers of funds
  • Certain gambling services

Compliance Program

The AML Law requires professionals to implement policies, controls, and procedures to mitigate and manage the risks of money laundering and terrorist financing. This includes:

  • Developing internal policies
  • Conducting customer due diligence
  • Cooperating with authorities
  • Record-keeping
  • Internal control
  • Compliance management
  • Appointing a compliance officer and employee screening

Professionals must also have an independent audit function to test these policies and controls. The responsible person for compliance must have relevant professional experience and be knowledgeable about Luxembourg’s legal and regulatory framework relating to AML/CTF.