Publication Of Circular 17/650 Extending The Application Of AML/CTF Legislation To Certain Primary Tax Offences

On 17 February 2017, the Commission de Surveillance du Secteur Financier ("CSSF"), together with the Financial Intelligence Unit ("FIU") have published a new circular (hereafter, "the Circular") providing more details on the professional duties relating to tax crimes that professionals should apply .

This circular follows the recent European and national development and legislations aiming to prevent the use of financial systems for the purpose of money laundering and financing terrorism (hereafter: "AML/CTF"), i.e. among others the 2012 FATF revised recommendations, the 4th AML directive as well as the Law of 23 December 2016 implementing the 2017 Tax reform, as it extends its application to tax crime related to direct and indirect taxes by formerly recognizing aggravated tax fraud and tax swindle as predicate offence .

3 types of Tax fraud have been defined, from simple tax fraud with administrative sanction to aggravated tax fraud and tax swindle, both considered as criminal sanctions and sentenced by imprisonment (1 month to 3/5 years) and fines (between 25.000 EUR and 6/10 times the amount of taxes avoided or reimbursement unduly obtained). The 2 latters being considered as predicate offence only.

Consequently, the Professionals must ensure that appropriate customer due diligence measures are in place to properly address tax crime for any new business relationships established from the 1st January 2017 as well as for any existing relationships on a risk based approach basis. This means that professionals will have to capture appropriate information on the purpose and nature of the business relationship, on the origin of the funds/assets to properly evaluate and document the financial situation of the client, its compliance with its tax obligations as well as scrutinize the transactional activities.

Terminated business relationships as at 31 December 2016 are out of scope. Dormant accounts have been considered as well in situation where the account would be reactivated or the assets requested by their successors.

The scope is applicable to tax crime committed or attempted both in Luxembourg and abroad as long as tax crime would be incriminated in...