Luxembourg’s Stricter Laws on Money Laundering and Terrorism Financing
Luxembourg has implemented a robust regime to combat money laundering (ML) and terrorism financing (TF), governed by the Law of August 12, 2004, as amended. To effectively prevent these financial crimes, professionals must implement effective measures.
Material and Moral Elements
A criminal offense under Luxembourg law consists of two essential elements: the material element and the moral element.
Material Element
The material element refers to the proof that the constitutive elements of the criminal offense, as described in the Criminal Code, have been met.
Moral Element
The moral element corresponds to the awareness and willingness with which the offense was committed.
Predicate Offenses
Money laundering offenses can only occur if they are linked to one of the predicate offenses listed in Article 506-1 of the Luxembourg Criminal Code. These predicate offenses include:
- Tax fraud and evasion
- A catch-all provision for any other offense punishable by a custodial sentence of at least six months
Reporting Offenses
One of the key professional obligations under the AML Law is the duty to inform the Financial Intelligence Unit (FIU) when there are reasonable grounds to suspect that ML/TF has been committed or attempted. Additionally, professionals and their employees are prohibited from:
- Tipping off customers about an investigation
- Providing information to competent authorities
Obstruction of Justice
The Luxembourg Criminal Code includes specific offenses relating to the obstruction of justice, including:
- Alteration, falsification, or erasure of evidence
- Destruction, removal, concealment, or alteration of documents or objects likely to facilitate the discovery of an offense or evidence
- Obstructing an investigation is subject to administrative sanctions under financial sector regulation
Compliance Program
The AML Law requires professionals to implement:
- Policies, controls, and procedures to mitigate and manage effectively the risks of ML/TF
- Internal policies, controls, and procedures
- Appointment of a compliance officer at an appropriate hierarchical level
- Customer due diligence measures, including:
- Identifying customers and verifying their identity
- Assessing and understanding the purpose and intended nature of the proposed business relationship
- Conducting ongoing due diligence
Simplified or Enhanced Due Diligence
Simplified due diligence requirements apply to:
- Occasional transactions that amount to less than €15,000
- Transfers of funds for less than €1,000
- Certain activities related to gambling services
Enhanced due diligence measures are required for high-risk customers, such as those in the financial sector.
Conclusion
Luxembourg has implemented a robust regime to combat money laundering and terrorism financing. Professionals must implement effective compliance programs and conduct thorough customer due diligence measures. Non-compliance with these regulations can lead to severe penalties, including criminal charges and fines.