(Oct. 17, 2008) Luxembourg recently adopted two laws relating to the fight against money laundering and terrorism financing. They amend previous legislation on this subject matter, in particular, the Law of November 12, 2004.
The first Law transposes into national law Directive 2005/60/EC of the European Parliament and Council of October 26, 2005, on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, and Commission Directive 2006/70/EC of August 1, 2006, laying down implementing measures for Directive 2005/60/EC. The main changes to the previous legislation include:
- New definitions: The law provides detailed definitions on property, beneficial owners, trust or company service providers, politically exposed persons, persons who have been entrusted with important public functions, immediate family members, persons known to be close associates, business relationships, shell banks, and natural persons or legal entities conducting financial activities on a very limited basis.
- Broader scope of application: The institutions and persons required to apply customer due diligence measures have been extended to include life insurance intermediaries and trust or company service providers, as well as all providers of goods, when payments equal to or in excess of €15,000 (about US$20,500) are made in cash.
- Modification of the responsibilities of institutions and persons: The Law spells out in great detail what type of customer due diligence measures must be taken by these professionals. The measures must be adapted to the risk of money laundering or terrorism financing presented by the customers. Simplified customer due diligence procedures may be applied, for example, to Luxembourg credit or financial institutions or an institution established in a country having similar customer identification procedures. When the risk of money laundering or terrorism financing is high, the law provides for enhanced customer due diligence, such as ensuring that the customer's identity is established by additional documents, data, or information. In order to avoid repeating customer identification procedures, professionals are authorized to rely on certain third parties to meet their customer due diligence duty. However, the final responsibility remains with the institution or person that relies on the third party.
- Reporting obligations: The reporting obligations are unchanged, but the new law emphasizes that facts that could be related to money laundering or financing of terrorism must be reported promptly to the prosecutor's office.
The second law modifies article 506-1 of the Penal Code, which defines money laundering. The list of primary offenses that can be the basis for money laundering has been considerably expanded. It includes: trafficking of stolen goods or other goods, fraud, swindling, counterfeiting of money, offenses against the environment, murder and infliction of grave injury, theft, smuggling, forgery, fraudulent misuse of funds, piracy, insider trading, and offenses punishable by a minimum prison sentence of more than six months. (Loi du 17 juillet 2008 portant transposition de la Directive 2005/60/CE du Parlement européen et du Conseil du 26 octobre 2005 relative à la prévention de l'utilisation du système financier aux fins du blanchissement de capitaux et du financement du terrorisme, portant transposition de la Directive 2006/60/CE du Parlement européen et du Conseil; Loi du 17 juillet 2008 relative à la lutte contre le blanchissement et contre le financement du terrorisme, A-No. 106 MÉMORIAL [Luxembourg's official gazette] 1496 & 1507, respectively (July 23, 2008), available at http://www.legilux.public.lu/leg/a/archives/2008/0106/index.html.)