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Luxembourg’s Financial Sanctions Checklist: A Guide to Compliance

The implementation of financial sanctions in Luxembourg is a complex process, requiring economic operators to be aware of their obligations and responsibilities under international law, European Union regulations, and national legislation. This guide provides a comprehensive overview of the legal framework and good practices for financial sanctions compliance.

Financial sanctions are governed by three levels: international, EU, and national.

International Level

  • Chapter VII of the UN Charter
  • 14 UN sanctions regimes

EU Level

  • Agreed by the Council of the European Union in support of specific EU Common Foreign and Security Policy objectives or UN Security Council Resolutions
  • Over 25 EU sanctions regimes are currently in place

National Level

  • The Law of October 27, 2010 is being amended (Draft bill 7395)

Obligations

Economic operators must:

  • Implement financial sanctions without delay to minimize the risk of capital flight
  • Communicate their implementation to the Ministry of Finance with a copy to the regulator
  • Apply for an exemption from restrictive measures and obtain prior authorization from the Ministry of Finance in case of doubt or uncertainty

Targeted Financial Sanctions

Financial sanctions aim to:

  • Freeze funds: Prevent any move, transfer, alteration, use, access to, or dealing with funds in any way that would result in a change to their volume, amount, location, ownership, possession, character, destination, or other changes that would enable the use of the funds
  • Freeze economic resources: Prevent their use to obtain funds, goods, or services in any way, including selling, hiring, or mortgaging them

Exemptions

Exemptions must be:

  • Provided for in legal acts. No provision, no exemption.
  • Prior authorized by the Ministry of Finance. Authorizations are not granted with retroactive effect.

Authorizations

Operators must:

  • Check whether a transaction conforms to sanctions regimes
  • Request authorization from the Ministry of Finance if the legal texts provide for such possibility
  • Send requests by letter or email to the Ministry of Finance, mentioning the legal provisions according to which they are submitted

Good Practices

It is recommended that operators:

  • Contact the Ministry of Finance after having carried out their analysis in cases of homonyms
  • Check the website of the Ministry of Finance for related and up-to-date documentation (e.g., opinions of the Commission, reports of the Panels of Experts, guidelines, standard forms, etc.)
  • Subscribe to the Newsletter of the Ministry of Finance
  • Be alert towards structures that involve designated persons or entities with a history of violations
  • Be attentive to other red flags

Financial sanctions do not only apply in the fight against terrorism financing and are not necessarily linked to money laundering (ML). Several activities or sources of income targeted by restrictive measures are perfectly legal. It is essential for economic operators to be aware of their obligations and responsibilities under international law, European Union regulations, and national legislation to avoid potential penalties and reputational damage.

If you have any questions or concerns regarding financial sanctions compliance in Luxembourg, please do not hesitate to contact the Ministry of Finance before executing a transaction.