Fight Against Money Laundering: Beware Of Excessive Zeal

There has been an interesting development in the controversial Luxembourgish case of an Icelandic bank (Landsbanki Luxembourg S.A.) in liquidation (the "Bank").

On July 10th 2014, Luxembourg's Court of Appeal sitting in chambers (hereinafter the "Court") gave a landmark judgment (hereinafter the "Judgment"). The Court overturned an order of the investigating judge which had ruled that the time limit to prosecute had been reached in respect of facts alleged in a criminal complaint filed by a group of 108 plaintiffs against, among others, the Bank.

The Court's views on the incompetence of the judge to rule on the facts that occurred in other jurisdictions do not require comment here. The Court itself had dealt with the issue of the international competence and declared the investigating Luxembourg judge incompetent to rule on offences of fraud. However, the Court retained jurisdiction for the other alleged offenses of the former bank executives (accounting fraud and criminal conspiracy) and, the most shocking part of the judgment, for the alleged offence of money-laundering by the liquidator.

The liquidator, who is a lawyer by profession, was appointed by the Luxembourg District Court sitting in commercial matters. Lawyers are among the professionals who are subject to the anti-money laundering law of November 12th 2004, as amended (the "AML Law"), but only in respect of part of their activities, excluding, inter alia, judicial activities. The obligation under the AML Law (which is the preventive aspect in the fight against money laundering) does not, therefore, apply to the judicial mandate of the liquidator. At the risk of stating the obvious, it must be remembered that the judicial activity of the lawyer, even if it falls outside the so-called preventative aspect of the fight against money-laundering, it is nevertheless subject to the provisions of the criminal law against money laundering.

Indeed, the absence of an obligation to report suspicions of money laundering (under the AML Law) shall in no way prejudice the application of the criminal law. Under the criminal law, a professional who receives funds whose illicit origin he cannot be unaware of, even in legitimate transactions, is guilty as (co)perpetrator or accomplice, of money-laundering.

According to the decision of the Court, the mandate of liquidator confers no immunity from prosecution. On that basis, the Court recalled some of the specific characteristics of the offence of...