Luxembourg’s Fight Against Money Laundering: Understanding the “Material Element” and “Moral Element”

In Luxembourg, combating money laundering requires a thorough understanding of both the “material element” (élément matériel) and the “moral element” (élément moral). The material element refers to the constitutive elements of the criminal offense, as described in the Criminal Code. This includes the predicate offenses that must be linked to the money laundering offense.

Defining Predicate Offenses

In Luxembourg, the offenses of money laundering materialize if they can be linked to one of the predicate offenses listed in Article 506-1 of the Criminal Code (Code pénal). The list includes a wide range of offenses and a catch-all provision that refers to any other offense punishable by a custodial sentence of at least six months.

• Examples of predicate offenses include:
  • Tax-related offenses, such as aggravated tax fraud and tax evasion
  • Offenses committed abroad

Reporting Offenses

One key professional obligation is the duty to inform the Financial Intelligence Unit (FIU) when there are suspicions of money laundering or a predicate offense. Professionals are also prohibited from tipping off customers about an investigation or providing information to competent authorities.

• The Luxembourg Criminal Code includes specific offenses related to obstructing justice, including:
  • Altering, falsifying, or erasing evidence
  • Destroying documents or objects that could facilitate the discovery of an offense or evidence

Thresholds and Restrictions

There is no threshold under which a breach of AML obligations will not be investigated or sanctioned. Failure to comply with AML regulations can result in breaches even if no transaction is executed.

• However, there are certain thresholds that serve to exclude certain professionals from the scope of application of the AML Law, including:
  • Transactions involving cash payments below €10,000
  • Occasional transactions below €15,000

Compliance Program

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

• Developing internal policies, controls, and procedures
• Appointing a compliance officer
• Conducting employee screening
• Implementing customer due diligence (CDD) measures, including:
  • Identifying customers and verifying their identity
  • Assessing the purpose and nature of the business relationship
  • Conducting ongoing monitoring

Note: There are no look-though requirements for certain types of persons or activities in Luxembourg.