Luxembourg Enhances Enforcement of International Sanctions
Strengthening Financial Institution Security Measures
Luxembourg has taken a significant step to strengthen its financial institution security measures by enhancing the enforcement of international sanctions in its territory. The country’s Law of 19 December 2020 relating to the implementation of restrictive measures in financial matters came into force on 27 December 2020.
Key Provisions of the Law
The law implements UN and EU-level restrictive measures against certain states, persons, entities, and groups in Luxembourg through Grand Ducal regulations. These measures aim to prevent terrorist financing and other malicious activities. Compliance with these measures is mandatory for all individuals and entities operating in the country, including financial institutions.
- Comprehensive Definition of Restrictive Measures: The law prohibits providing financial services to sanctioned persons and freezing their funds, assets, or economic resources.
- Supervisory Authorities and Self-Regulatory Bodies: These bodies are responsible for ensuring compliance with restrictive measures, with powers similar to those under the Anti-Money Laundering Law.
Grand Ducal Regulations
Grand Ducal regulations will designate specific restrictive measures, either on a national basis or by reference to UN or EU acts. The law also sets a 60-day application limit for restrictive measures adopted at Luxembourg level before relevant sanctions are adopted at UN or EU level, with 30-day extensions permitted in certain circumstances.
Compliance and Consequences
Legal entities bound to execute restrictive measures must inform the authorities of this execution, and there is a new exception to the professional secrecy obligation. Failure to comply with the law will result in severe sanctions, including imprisonment and fines.
Impact on Financial Institutions
This development aims to strengthen Luxembourg’s position as a financial hub and ensure that its financial institutions are secure and compliant with international standards. Financial institutions operating in Luxembourg should be aware of these enhanced enforcement measures and take necessary steps to comply with the law to avoid severe penalties.