CSSF Circular 17/650 - Implementing AML/TF Professional Due Diligences Relating To Primary Tax Offences

Background

The Law of 23 December 2016 implementing the 2017 tax reform (the Law) is, among others, extending the money laundering offence to tax crimes related to direct and indirect taxes.

The Commission de Surveillance du Secteur Financier (CSSF) issued a circular drawn up with the Financial Intelligence Unit (FIU) clarifying AML/TF professional due diligences in relation to primary tax offences.

The CSSF circular 17/650 applies to all persons and undertakings falling under the supervision of the CSSF.

Thresholds defined for fiscal fraud types

The Law distinguishes three types of fiscal fraud:

Definition

Sanctioned by

Simple offence

When the fraud is not an aggravated fiscal fraud nor a tax swindle

Administrative courts

Aggravated fiscal fraud

When the amount of fraud is considered as significant, i.e. if either the amount of the tax defrauded (or fraudulently reimbursed) exceeds €200,000, or if the tax defrauded (or fraudulently reimbursed) (i) exceeds 25 percent of the annual tax due (or fraudulently reimbursed) and (ii) is equal or exceeds €10,000.

Imprisonment from 1 month to 3 years and a fine of between €25,000 and 6 times the amount of tax defrauded or fraudulently reimbursed

Tax swindle (l'escroquerie fiscale)

If the fraud involves a significant amount either in absolute amount or in relation to the annual tax due or with the annual repayment due and has been committed by the systematic use of fraudulent practices intended to conceal facts relevant to the authority or to persuade it of inaccurate facts

Imprisonment from 1 month to 5 years and a fine of between €25,000 and 10 times the amount of tax defrauded or fraudulently reimbursed

The simple tax offence is not considered as a primary tax offence.

Tax swindle was already defined in the criminal code before the adoption of the Law and there have already been convictions for tax swindle in Luxembourg.

The above definitions, which give to professionals an idea of the materiality level, are provided in line with what the Luxembourg Courts will use to determine the category of tax offense or crime. The monitoring of the level of suspected tax offence that a customer would potential face based on the defined thresholds could be very complex.

Application in time

Section 1 of CSSF circular 17/650 describes the customer due diligence measures in connection with primary tax offenses, committed or attempted, in Luxembourg or abroad for new, existing, ongoing and ended customer...