Luxembourg Toughens Financial Sanctions Enforcement

As international sanctions take effect, Luxembourg has introduced new legislation to bolster its financial security. The Law of 19 December 2020 relating to the implementation of restrictive measures in financial matters came into force on 27 December 2020, replacing the previous Law of 27 October 2010.

Key Features of the Legislation

• Comprehensive Definition of “Restrictive Measures”: The law includes prohibitions on providing financial services to sanctioned individuals and entities as well as the freezing of their assets.
• Supervisory Authorities and Self-Regulatory Bodies: These bodies will oversee compliance with the measures, with powers similar to those provided for in Luxembourg’s Anti-Money Laundering Law.

Consequences of Non-Compliance

• Severe Penalties: Failure to comply with the measures may result in imprisonment for up to five years and fines of up to €5 million.
• Notification and Disclosure: Legal entities subject to these measures will be required to notify authorities of their execution and have an exception to their professional secrecy obligations if they disclose confidential information in good faith to comply with the law.

Implementation Process

• Designation of Sanctions: Specific sanctions will be designated through Grand Ducal regulations, either individually or by reference to a list appended to a UN or EU act.
• Implementation Timeline: There is a 60-day limit for implementing sanctions adopted at the national level before they are adopted internationally, although this can be extended by up to 30 days in exceptional circumstances.

Purpose of the Legislation

The introduction of these measures aims to strengthen Luxembourg’s position as a major financial centre and ensure that it remains in compliance with international standards.