Luxembourg Banking Secrecy Laws Undergo Substantial Overhaul

Effective from February 27, 2018, Luxembourg’s banking secrecy laws have undergone significant changes aimed at facilitating the use of outsourcing solutions by financial institutions while maintaining client confidentiality.

Amended Law on the Financial Sector (LFS)

The amended LFS introduces an exemption for transferring confidential information to entities established in Luxembourg and supervised by:

• Commission de Surveillance du Secteur Financier (CSSF)
• European Central Bank
• Commissariat aux Assurances

These entities must be subject to criminal sanctions for breaching professional secrecy obligations.

Outsourcing Activities

For outsourcing activities, whether located inside or outside Luxembourg, financial institutions can transfer confidential information under the following conditions:

• Obtain client consent through a legally binding agreement or method agreed upon by parties involved
• Ensure the outsourced entity is subject to a professional secrecy obligation or bound by a non-disclosure agreement

Simplified Client Consent Process

The new regime simplifies the process of obtaining client consent, allowing financial institutions to rely on:

• General terms and conditions
• Contractual confidentiality undertaking at the level of the recipient of information

Application to Insurance Companies and Payment Service Providers

The amendments also apply to insurance companies and payment service providers, which are subject to similar professional secrecy obligations. The changes aim to strike a balance between maintaining confidentiality while facilitating outsourcing arrangements for financial institutions in Luxembourg.

By implementing these changes, Luxembourg aims to maintain the integrity of client confidentiality while streamlining the process of outsourcing activities for financial institutions.