Luxembourg – Know Your Customer (KYC) Rules

 

 

Despite its standing as the second-smallest member of the European Union (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.

KNOW-YOUR-CUSTOMER (KYC) RULES:

 

Enhanced due diligence procedures for PEPs:

 

PEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used interchangeably

    • Foreign PEP: YES
    • Domestic PEP: NO

Luxembourg – KYC covered entities

 

The following is a list of Know Your Customer entities covered by Luxembourg Law:

    • 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 networks operators
    • Insurance brokers and providers
    • Auditors, accountants, notaries, and lawyers
    • Casinos and gaming establishments
    • Real estate agents
    • and any other natural or legal persons trading in goods to the extent that payments are made in cash in an amount of €15,000 (approximately $20,250) or more

Luxembourg – Suspicious Transaction Reporting (STR) Requirements:

 

Number of STRs received and time frame: 7,741 as of November 2011

Number of CTRs received and time frame: Not applicable

The following is a list of STR covered entities covered by Luxembourg Law:

    • 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 networks operators
    • Insurance brokers and providers
    • Auditors, accountants, notaries, and lawyers
    • Casinos and gaming establishments
    • Real estate agents
    • and any other natural or legal persons trading in goods to the extent that payments are made in cash in an amount of €15,000 (approximately $20,250) or more

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

 

Prosecutions: 127 as of November 2011
Convictions: 77 as of November 2011

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

During 2011, competent authorities were busy implementing the comprehensive package of legislative and administrative actions that were put in place in 2010, notably the Law of October 27, 2010. This law introduces important changes to AML/CFT provisions and prescribes changes to 20 existing pieces of legislation. Most visibly, the financial intelligence unit (FIU) expanded its capabilities through the hiring of additional analysts and continued preparations for an enlargement of the FIU premises. Nevertheless, state prosecution officials have called publicly for further resources, notably more analysts.

In response to these requests, the Ministry of Justice has pledged to continue supporting the state prosecution, and the FIU in particular, with the level of resources needed to fulfill its responsibilities. In terms of quantitative data, the number of transaction reports, money laundering criminal prosecutions, and convictions has risen in comparison to 2010 following the systematic implementation of the new legislation.