On 6 February 2018, the Luxembourg Parliament voted a new bill (the Law) implementing locally some provisions of the fourth anti-money laundering Directive (2015/849) on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (the Directive), and reinforcing measures of the Regulation (2015/847) on information accompanying transfers of funds. The Law mainly amends the provisions of the national law of 12 November 2004 on the fight against money laundering and terrorist financing (the AML Law).
The Law does not provide for the implementation of a beneficial owners’ register but shall be considered concurrently with the two draft bills of law published on 6 December 2017 by the Luxembourg Parliament, with respect to the introduction of a central ultimate beneficial owner register in Luxembourg for Luxembourg legal entities (draft bill of law n° 7217) and trusts (draft bill of law n° 7216), also implementing the new transparency measures provided for by the Directive.
These two draft bills of law are expected to be voted within the coming months.
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Who is concerned?
The Law explicitly submits the following entities and professionals to the AML Law:
- Foreign credit institutions and financial institutions when they perform their activities in Luxembourg through branches or simply as free service providers;
- Every person exercising the Family Office activity; and
- Court bailiffs when they proceed to valuation and public sales of furniture, movables and harvestings.
As a reminder, the following entities were already subject to the AML Law:
- Financial institutions;
- Pension funds;
- Securitization undertakings when they carry on business as a service provider to companies and insurance and reinsurance undertakings and their intermediaries when carrying out credit or surety transactions;
- Statutory auditors (réviseurs d’entreprises), approved statutory auditors (réviseurs d’entreprises agréés), audit firms (cabinets de révision) and approved audit firms (cabinets de révision agréés);
- Real estate agents established or acting in Luxembourg;
- Notaries; and
Scope of the Law
Reinforcement of the risk based approach
All professionals subject to the AML Law, as amended by the Law, shall identify and classify the risks of money laundering or terrorist financing linked to the transactions they carry out for their clients.
In that respect, professionals are invited to “implement" an appropriate vigilance and take the necessary measures with respect to the risk incurred (from low to high) by taking into account various adjustment risk factors and variables, such as the type of clients (i.e. listed companies / public companies, politically exposed persons, etc.), geographical areas (i.e. member states of the European Union, third countries with effective anti-money laundering control systems, level of corruption), the sectors of activity, products or services concerned.
Clarification of beneficial owner definition
The definition of ultimate beneficial owner is clarified as follows:
- A shareholding of 25% plus one share or an ownership interest of more than 25% in the customer held by a natural person, shall be an indication of direct or indirect ownership (if through a corporate entity).
- The managing representative shall be identified if a natural person cannot be identified as beneficial owner or if there is a doubt on whether the identified persons are not the beneficial owners.
For trusts and fiducial arrangements:
- The settlor, the trustee, the protector, the beneficiaries or the class of persons in whose main interest the legal entity is set up or operates as well as any other natural person exercising ultimate control over the trust by means of direct or indirect ownership or by other means shall be identified.
Extension of the notion of political exposed person (PEP)
The notion of PEP is extended and now includes the persons who exercise or have exercised important public positions within the national territory (i.e. domestic or national PEP), whereas only foreign PEP and senior executives of international organizations were previously concerned.
Professionals will therefore have to monitor these people intensively by applying dedicated due diligence measures (in case it is established that these individuals are at a higher risk according to the conducted analysis).
Precision regarding the adequate internal management requirements
All the professionals subject to the AML Law and the Law shall:
- Implement policies and monitoring procedures to effectively check, mitigate, and manage the money laundering and terrorist financing risks that are identified at an/a international, European, national, sector level as well as at their own level;
- Take the necessary measures to inform their employees of their anti-money laundering and counter terrorist financing and data protection obligations, in relation to their level of risk, their size and their nature;
- Implement an appropriate procedure to allow their employees to report internally any anti-money laundering and counter terrorist financing obligation breaches through a specific, independent and anonymous channel; and
- Implement group-wide policies and procedures (including data protection policies and sharing information policies within the group) in order to apply, to their branches and majority-owned subsidiaries, measures that are equivalent to those laid down in the AML Law or in the fourth anti-money laundering Directive.
Control authorities and self-regulatory bodies
The Law inserts in the AML Law a list of authorities (Commission de surveillance du secteur financier, Commissariat aux assurances, Administration de l’enregistrement et des domaines, Institut des réviseurs d’entreprises, Ordre des experts-comptables, Chambre des Notaires, Conseil de l’ordre and Chambre des huissiers) which shall ensure :
- An efficient monitoring of the professionals compliance with their anti-money laundering and counter terrorist financing obligations (and, if required, with the cooperation of the competent authorities of the Member state where the professional has its head office, if it operates in Luxembourg via any kind of establishment); and
- Those professionals have access to up-to-date information on the practices of money launderers and financers of terrorism and indications leading to the recognition of suspicious transactions.
The authorities referred to above will have the power to impose administrative sanctions and other administrative measures (administrative fine which may in some cases reach EUR 5,000,000 or 10% of total annual turnover according to the latest annual accounts), which shall be determined on the basis of the circumstances listed in the AML Law.
An appeal can be filed before the Administrative jurisdiction within one month as from the notification of the decision.
Fine ranging from EUR 12,500 to EUR 5,000,000.