Luxembourg Tightens Noose on Compliance with International Sanctions
Strengthening Enforcement Measures
Luxembourg has introduced new legislation aimed at bolstering the enforcement of international sanctions within its borders. The Law of 19 December 2020 came into effect on 27 December 2020 and implements restrictive measures adopted by the United Nations (UN) and European Union (EU) against specific countries, individuals, entities, and groups.
Key Changes
The new law replaces the previous legislation, which focused solely on terrorist financing. The revised framework requires Luxembourg citizens, legal entities, and other individuals operating within the country to adhere to international sanctions as outlined in UN and EU acts. Failure to comply could result in severe penalties, including:
- Imprisonment for up to five years
- Fines of up to EUR 5 million
Broad Definition of Restrictive Measures
The law includes a broad definition of “restrictive measures” which encompasses prohibitions on:
- Providing financial services to sanctioned individuals and entities
- Freezing of their assets and economic resources
Supervisory authorities and self-regulatory bodies are empowered to oversee compliance by legal entities with these measures, utilizing powers similar to those provided under Luxembourg’s Anti-Money Laundering Law.
Designation of In-Scope Restrictive Measures
The law enables the designation of in-scope restrictive measures through Grand Ducal regulations, which can be:
- Specific
- Referenced to a list appended to a UN or EU act
A 60-day application limit is set for sanctions adopted at the national level before corresponding measures are implemented by the UN or EU. Extensions of up to 30 days may be granted if justified.
Compliance Obligations
Legal entities bound to implement restrictive measures must inform authorities of their execution. Certain entities are exempt from professional secrecy obligations when disclosing confidential information in good faith to comply with the law.
Importance of Compliance
The legislation emphasizes the importance of compliance, warning that failure to do so could result in severe sanctions, including imprisonment and fines. It is essential for individuals and legal entities operating within Luxembourg to understand their obligations under this new law and take necessary steps to ensure compliance.