Luxembourg Takes Center Stage in International Sanctions Compliance
Strengthening Luxembourg’s Commitment to International Sanctions
The Luxembourg legislator has published the Law of 19 December 2020 implementing financial restrictive measures, effective from December 27, 2020. This law provides a dedicated legislative arsenal for the implementation of financial restrictive measures adopted by the United Nations and the European Union.
What Are Financial Restrictive Measures?
Financial restrictive measures refer to prohibitions or restrictions on:
- Financial activities
- Provision of financial services
- Technical assistance, training, or advice in relation to certain states, natural and legal persons, entities, or groups
These lists will be established by virtue of a Grand-ducal decree.
Who Does the Law Apply To?
The law applies to:
- Luxembourg nationals
- Legal persons with registered offices or permanent establishments in the country
- Branches of Luxembourg legal persons operating abroad
- All other natural and legal persons operating on Luxembourg territory
Supervision and Enforcement
Financial regulators and self-regulatory bodies have been made responsible for supervising individuals under their jurisdiction to ensure effective implementation of financial restrictive measures. These authorities have been granted broad supervisory and investigatory powers, including:
- Accessing documents
- Requesting information
- Carrying out on-site inspections
- Seizing documents or electronic files
- Imposing administrative sanctions
Administrative sanctions may include:
- Warnings
- Reprimands
- Public statements identifying the natural or legal person and the nature of the breach
- Temporary suspensions
- Temporary bans on exercising professional activities
- Fines (up to EUR 1,000,000 for individuals and EUR 5,000,000 for legal persons)
Criminal Sanctions
Criminal sanctions are also applicable for disrespecting financial restrictive measures, punishable by:
- Imprisonment for eight days to five years
- A fine of EUR 12,500 to EUR 5,000,000 or one of these penalties only
The law allows for the cumulation of sanctions, meaning that both legal entities and natural persons may face penalties for the same offense.
Conclusion
With this new legislation in place, Luxembourg has taken another step towards strengthening its compliance with international sanctions and ensuring the integrity of its financial system.