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Luxembourg Banking Secrecy Laws Clarified: What You Need to Know
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In a move aimed at modernizing its financial sector, Luxembourg has amended its banking secrecy laws to allow for greater use of outsourcing solutions and transfers of confidential information. The changes, which took effect on February 27, 2018, aim to strike a balance between the need for financial institutions to share sensitive information with third-party providers and the requirement to maintain confidentiality.
Exemptions from Banking Secrecy Obligation
Under the new regime, Luxembourg-based financial institutions are now exempt from the banking secrecy obligation when outsourcing activities to entities supervised by:
- Commission de Surveillance du Secteur Financier (CSSF)
- European Central Bank
- Commissariat aux Assurances
These entities must also be subject to criminal sanctions for breaching professional secrecy obligations.
Transfers of Confidential Information
In cases where outsourcing is carried out with entities that are not subject to such supervision, financial institutions may transfer confidential information only if the client has provided prior consent. This consent must cover:
- Not only the outsourcing of services but also
- The type of information that will be disclosed
- The country in which the provider is established
New Provisions for Insurance Companies and Payment Service Providers
The amended laws also introduce new provisions for insurance companies and payment service providers, which are subject to similar professional secrecy obligations. These entities may now transfer confidential information to third-party providers with client consent, provided they have obtained a contractual confidentiality undertaking from the recipient.
Objectives of the Changes
The changes are aimed at streamlining the process of obtaining client consent and making it easier for financial institutions to outsource activities while maintaining confidentiality. The new regime is expected to facilitate the development of outsourcing solutions in Luxembourg’s financial sector, which has long been known for its strict banking secrecy laws.
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