A New Era In The Fight Against Money Laundering

By the law of December 23, 2016 implementing the tax reform 2017 ("The Act "), the Grand Duchy of Luxembourg has profoundly modified its tax infrastructure.

From the system of taxation of cross-border workers to the tax credits mechanism by way of company's tax regime, all the tax issues affecting Grand Duchy citizens' live and companies established there have been addressed and dealt with by Luxembourg authorities.

In this vast reform project, the fight against tax evasion, money laundering and terrorism financing has not been neglected.

The Act contains several new criminal provisions which provide the judicial authorities with new enforcement instruments (2). Alongside this renewed legislative framework, new "Due Diligence" and "KYC-KYT" procedures have been developed jointly by the Commission de Surveillance du Secteur Financier (C.S.S.F.) and the Luxembourg Financial Intelligence Unit ("F.I.U.") and published in the circular "CSSF 17/650".

1. Two new primary offenses ...

   Transposing the revised FATF standard 2012/2013 and the European Parliament and Council Directive 2015/848 of 20 May 2015 on combating money laundering and terrorism financing, the Act created two new primary offences: Aggravated Tax Fraud and Tax Swindle.

   These two new primary offenses require two components. A certain gravity, on one hand (the Act sets quantitative thresholds) and fraudulent maneuvers (concealment, lies), on the other.

   The sanctions imposed on tax defrauders and all those who helped them to launder the proceeds of these frauds are particularly severe. People convicted of fraud and/or money laundering face fines ranging from €1,250 to €1,250,000 and sentences ranging from one month to five years' imprisonment.

   However, the Luxembourg authorities did not merely focus on extending the perimeter of the laundering offense.

   The members of the F.I.U. and the specialists of the C.S.S.F. have developed a "Due Diligence" and "KYC-KYT" framework specifically adapted to the new definition of the laundering offense.

2. .... and a updated "Due Diligence" and "KYC-KYT" Framework

   Circular "CSSF 17/650" sets out the general principles of the new "Due Diligence" and "KYC-KYT" Procedures to be implemented and followed by the Entities and the Professionals under the supervision of the C.S.S.F.

   Not claiming to be exhaustive, we shall only underline the salient features of the framework set up by the circular.

   Non-Retroactive Application The new customer and transaction...