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Luxembourg Tightens Grip on Money Laundering: A Comprehensive Guide

LUXEMBOURG - In an effort to combat money laundering and terrorist financing, the Grand Duchy of Luxembourg has introduced new regulations and guidelines for financial institutions and professionals.

Criminal Offenses and Predicate Offenses

Under Luxembourg law, a criminal offense requires two essential elements: a “material element” (élément matériel), which refers to the proof that the constitutive elements of the criminal offense have been met, and a “moral element” (élément moral), equivalent to intent, signifying awareness and willingness with which the offense was committed.

  • The Luxembourg Criminal Code lists predicate offenses, including tax evasion, which can be linked to money laundering.
  • The Financial Intelligence Unit (FIU) has published a circular outlining risk factors for professionals to identify potential cases of laundering of predicate tax offenses.

Reporting Offenses

Professionals subject to the Anti-Money Laundering (AML) Law are required to:

  • Inform the FIU if they suspect or have reasonable grounds to suspect money laundering, a predicate offense, or terrorism financing.
  • Refrain from tipping off customers about investigations and maintain confidentiality.

Thresholds and Restrictions

There are no thresholds under which a breach of the AML Law will not be investigated or sanctioned. However:

  • Certain professionals may be exempt from applying customer due diligence measures if transactions amount to less than EUR 10,000.
  • Providers of gambling services may not require due diligence for transactions below EUR 2,000.

Compliance Requirements

Implementing an AML compliance program is a regulatory requirement in Luxembourg. Professionals must:

  • Develop internal policies, controls, and procedures to mitigate the risks of money laundering and terrorist financing.
  • Appoint a person responsible for compliance at the level of authorized management or board of directors, as well as a compliance officer.

Customer due diligence measures include:

  • Identifying customers and verifying their identity
  • Assessing the purpose and nature of the business relationship
  • Conducting ongoing monitoring of transactions

Simplified due diligence requirements apply to certain types of persons and activities, while enhanced due diligence is required for high-risk clients.

Conclusion

Luxembourg’s efforts to combat money laundering and terrorist financing demonstrate its commitment to maintaining a stable financial system. Professionals and financial institutions must ensure compliance with AML regulations to prevent illegal activities and maintain public trust in the financial sector.