Countries/Jurisdictions of Primary Concern - Luxembourg

Bureau of International Narcotics and Law Enforcement Affairs
Report

Despite its standing as the second-smallest member of the EU, Luxembourg is one of the largest financial centers in the world. It also operates as an offshore financial center. Although there are a handful of domestic banks operating in the country, the majority of banks registered in Luxembourg are foreign subsidiaries of banks in Germany, Belgium, France, Italy, and Switzerland. While Luxembourg is not a major hub for illicit narcotics distribution, the size and sophistication of its financial sector create opportunities for money laundering, tax evasion, and other financial crimes.

Luxembourg has been called a “magical fairyland” for well-known corporations that seek to drastically minimize their tax bills. Abusive transfer pricing or the manipulation of the international trading system within the same multinational group to take advantage of lower jurisdictional tax rates represents enormous tax loss in the producing country. Hundreds of well-known multinationals have secured deals in Luxembourg that allow them to legally slash their taxes in their home countries. In many cases the Luxembourg subsidiaries of multinationals, that on paper handle hundreds of millions of dollars in business, maintain only a token presence or a simple front address.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: http://www.state.gov/j/ct/rls/crt/

Do FINANCIAL INSTITUTIONs engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or illegal drug sales that otherwise significantly affect the U.S.: NO

criminalizATION OF money laundering:

“All serious crimes” approach or “list” approach to predicate crimes: Combination approach

Are legal persons covered: criminally: YES civilly: YES

Know-your-customer (KYC) rules:

Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: NO

KYC covered entities: Banks and payment institutions; investment, tax, and economic advisers; brokers, custodians, and underwriters of financial instruments; commission agents, private portfolio managers, and market makers; managers and distributors of units/shares in undertakings for collective investments (UCIs); financial intermediation firms, registrar agents, management companies, trust and company service providers, and operators of a regulated market authorized in Luxembourg; foreign exchange cash operations; debt recovery and lending operations; pension funds and mutual savings fund administrators; corporate domiciliation agents, company formation and management services, client communication agents, and financial sector administrative agents; primary and secondary financial sector IT systems and communication network operators; insurance brokers and providers; management companies for reinsurance undertakings or insurance captives, run-off management companies, actuarial service providers, insurance portfolio managers, governance service providers, and insurance claim handlers; auditors, accountants, notaries, and lawyers; casinos and gaming establishments; real estate agents; and high-value goods dealers

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 6,676: January 1 - November 30, 2014

Number of CTRs received and time frame: Not applicable

STR covered entities: Banks and payment institutions; investment, tax, and economic advisers; brokers, custodians, and underwriters of financial instruments; commission agents, private portfolio managers, and market makers; managers and distributors of units/shares in UCIs; financial intermediation firms, registrar agents, management companies, trust and company service providers, and operators of a regulated market authorized in Luxembourg; foreign exchange cash operations; debt recovery and lending operations; pension funds and mutual savings fund administrators; corporate domiciliation agents, company formation and management services, client communication agents, and financial sector administrative agents; primary and secondary financial sector IT systems and communication network operators; insurance brokers and providers; management companies for reinsurance undertakings or insurance captives, run-off management companies, actuarial service providers, insurance portfolio managers, governance service providers, and insurance claim handlers; auditors, accountants, notaries, and lawyers; casinos and gaming establishments; real estate agents; and high-value goods dealers

money laundering criminal Prosecutions/convictions:

Prosecutions: 230: January 1 - December 1, 2014

Convictions: 167: January 1 - December 1, 2014

Records exchange mechanism:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

Luxembourg is a member of the FATF. Its most recent mutual evaluation can be found at: http://www.fatf-gafi.org/countries/j-m/luxembourg/documents/fur-luxembourg-2014.html

Enforcement and implementation issues and comments:

During 2014, Luxembourg continued to strengthen its AML/CFT framework. Accordingly, a range of legislative and implementation measures were taken by competent authorities in the AML/CFT area. The Law of 18 July 2014 approving the Council of Europe Convention on Cybercrime of 23 November 2001 and its Protocol concerning the criminalization of acts of a racist and xenophobic nature committed through computer systems of 28 January 2003 implements both the Convention and its Protocol into national law. The law introduces new criminal offenses in the area of cybercrime in the Criminal Code. The law also introduces an extension of the money laundering offense to the area of cybercrime. The Law of 28 July 2014 regarding the immobilization of bearer shares provides for the mandatory immobilization of bearer shares. The law requires the mandatory immobilization of bearer shares with a covered entity. The obligations set forth in the Law of 28 July 2014 are subject to criminal sanctions.

In 2014, the Supervisory Authority of the Financial Sector, the CSSF, focused its efforts on further strengthening its AML/CFT supervision. The CSSF conducted 41 onsite AML/CFT inspections in 2014. The measures taken within the scope of its supervisory powers include administrative financial sanctions, injunction orders, and refusal/withdrawal of the “fit and properness” character of a licensed person. The CSSF also increased its cooperation and information exchange with the Office of the Public Prosecutor, the financial intelligence unit (FIU), and the criminal investigation police, as well as with the other supervisory authorities.

The Supervisory Authority of the Insurance Sector, the CAA, issued CAA Regulation no. 13/01 on December 23, 2013 regarding the fight against AML/CFT, which came into full effect in 2014. The regulation provides further clarification of AML/CFT requirements contained in the AML/CFT Law and the related Grand-Ducal Regulation, in particular with respect to the definition of the beneficial owner and ML/TF risk assessment. It also addresses preventive measures.

In 2014, the Administration for Indirect Taxes (AIT), the supervisory authority of designated non-financial businesses and professions not supervised by self-regulatory organizations, adopted several circular letters regulating its supervised entities, including accountants, economic advisers, real estate agents, and dealers in high-value goods. AIT teams conducted 48 AML/CFT onsite inspections of its supervised entities and improved its webpage to add more AML/CFT material. The AIT also took measures within the scope of its supervisory powers, such as administrative financial sanctions.

The FIU continued to organize outreach to covered entities and to hold AML/CFT training jointly with other supervisory agencies and self-regulatory organizations. The FIU continues to be involved in a project to promote cooperation among European FIUs regarding the cross-border exchange of STRs related to electronic commerce.