In brief
On 19 December 2025, a landmark law (originating from draft Bill No. 8486) entered into force in Luxembourg.
This law introduces sweeping changes to Luxembourg’s anti-money laundering (AML) and criminal procedure framework, directly addressing the priority and recommended actions identified in Luxembourg’s Financial Action Task Force (FATF) mutual evaluation report (27 September 2023).
The reform aims to accelerate criminal proceedings; strengthen the fight against money laundering, terrorist financing and proliferation; and ensure Luxembourg’s compliance with international standards in advance of the June 2026 FATF deadline.
For further information or tailored advice about this law, please contact your usual Baker McKenzie contact.
Key changes introduced by the law
Comprehensive predicate offenses regime
The centerpiece of the reform is the overhaul of Article 506‑1 of the Luxembourg Criminal Code (“Criminal Code”). The money laundering offence now broadly encompasses any crime or misdemeanor (crime ou délit) as a predicate offense. This replaces the previous approach of maintaining an enumerated list, which had become difficult as underlying texts evolved. The revised provision expressly includes the purpose or product of a crime, whether direct or indirect, as well as the material benefit deriving from a crime. In practice, this means that the offense covers not only the proceeds received, but also the material benefits or savings that arise because of criminal conduct.
Considering that Article 506-3 of the Criminal Code remains unchanged, it is irrelevant whether the predicate offense was committed in Luxembourg or abroad. The only requirement is that the act also be punishable in the country where it was committed, except for certain serious offenses.
As a result, funds derived from tax fraud committed in another jurisdiction — provided the act is also criminalized there — can be prosecuted as money laundering in Luxembourg. This applies even if the original perpetrator cannot be prosecuted due to limitation periods or death.
This approach allows authorities to address the reality of foreign predicate offenses driving risks in a globalized financial center. It also aligns with the FATF’s 2023 mutual evaluation report, which underscores Luxembourg’s exposure to foreign tax crimes, corruption and fraud, and urges sustained focus on complex investigations and prosecutions.
Acceleration and expansion of criminal proceedings
The reform expands the prosecutorial “mini‑instruction” powers in Article 24‑1 of the Luxembourg Code of Criminal Procedure. Prosecutors can now request multiple investigative acts without opening a full investigation, and the former three‑month interval between requests has been removed. The scope of eligible offenses has been enlarged to cover a broader range of economic and probity offenses, including forgery and its use (articles 193, 196 and 197 of the Criminal Code), corruption, illegal interest‑taking, influence peddling, extortion (Article 470 of the Criminal Code), and false accounting (articles 1500‑8 and 1500‑9 of the law of 10 August 1915 on commercial companies, as amended).
In a complex financial crime case involving both forgery and corruption, the prosecutor can now swiftly request multiple investigative measures (e.g., searches, seizures and expert reports) without procedural delays.
Streamlined procedures for legal entities and individuals
The reform modernizes Article 102 of the Luxembourg Code of Criminal Procedure to reduce procedural impasses. A legal entity that fails to appear despite a summons can now be indicted based on a nonappearance report, which helps avoid stalemates and prolonged immobilization of seized assets. For individuals subject to an arrest warrant who cannot be apprehended, the text clarifies that indictment can proceed, allowing the case to advance despite the person’s absence.
Reform of suspended sentences (sursis)
The amendment to Article 195‑1 of the Luxembourg Code of Criminal Procedure narrows the obligation to provide special reasons for denying a suspension for prison sentences of less than two years, with an exception for legal recidivism. This change aims to correct the misconception of a quasi‑automatic suspension for first‑time offenders, while preserving the court’s ability to individualize sanctions in line with the seriousness of the facts.
Practical implications
Broader reach of the money laundering offense
The broader concept of predicate offenses, combined with the “material benefit” language, significantly expands the scope of money laundering offenses to conduct not traditionally associated with laundering scenarios. This development means that the offense now encompasses a wider range of benefits derived from criminal acts, whether direct or indirect. Therefore, the reform intents to reduce procedural formalism and enhance prosecutorial effectiveness by expanding the material scope of criminal enforcement in money laundering matters. The generalized formulation and inclusion of material benefits require careful legal analyses to determine the boundaries of application and ensure compliance. These implications align with Luxembourg’s legislative objectives and the FATF’s emphasis on enabling more complex investigations and prosecutions.
Implications for professionals subject to AML obligations
The Luxembourg law of 12 November 2004 on the fight against money laundering and terrorist financing, as amended (“AML Law”), defines money laundering and the “associated underlying offense” by reference to the Criminal Code. As a result, the duty to detect and the obligation to report suspicions to the Financial Intelligence Unit now extend to all types of offenses, not just financial or economic crimes. In addition, under Article 5(1)(a) of the AML Law, “the obligation to report suspicious transactions applies without the reporting persons having to qualify the underlying offense.”
In practical terms, this expanded scope requires professionals subject to AML obligations to further strengthen their risk assessment practices. Suspicion may now arise from any activity suggesting involvement in criminal conduct, irrespective of whether such conduct would traditionally be regarded as financial, economic or organized crime. Consequently, internal AML procedures and transactions monitoring systems should be calibrated to capture a broader range of atypical or unexplained activities.
In operational terms, institutions and professionals subject to AML obligations will need to recalibrate transaction‑monitoring scenarios, screening rules and analytics to identify patterns that may signal proceeds, indirect benefits or cost-savings linked to any offense under Luxembourg law. They will also need to broaden training so that frontline teams and investigators can recognize a wider range of red flags, including those associated with breaches of professional secrecy, certain environmental offenses and foreign predicate offense risks, such as tax crimes and corruption. These updates align with the FATF’s emphasis on Luxembourg’s cross‑border exposure and the need to sustain a risk‑based approach that supports more complex investigations.
Recommended actions for companies
Companies should do the following:
- Update their enterprise‑wide money‑laundering risk assessments and AML policies to reflect the “all‑offenses” approach and the material‑benefit concept.
- Refresh their investigation playbooks so that internal case-handling and suspicious transaction reports remain robust where precise and detailed knowledge of the underlying offense is unavailable.
- Enhance their cross‑border documentation to address dual‑criminality considerations, where applicable.
- Ensure their governance and oversight arrangements are proportionate to the expanded scope, including model validation, post‑implementation reviews and targeted thematic audits to test whether the control environment can detect indirect benefits arising from foreign predicate offenses.
- Provide targeted training to AML and compliance staff to ensure a consistent understanding of the “all-offenses” approach, the material-benefit concept and the evidentiary threshold for suspicion, with a focus on fact-based analysis rather than legal qualification.
- Strengthen documentation standards to ensure full traceability and defensibility of AML based decisions.
These steps align with the reform’s objective to facilitate more effective enforcement without altering the baseline penalties. They speak directly to areas of focus identified by the FATF.