Anti-money laundering : Legal framework
AML Directives - amended law of 2004 - criminal Code - Circulars - Guidelines
Anti-money laundering and countering the financing of terrorism (AML/CTF) has a relatively recent origin.
The creation of the Financial Action Task Force on money laundering (FATF) at the G7 summit in Paris in 1989 is often regarded as its starting point.
The role of the FATF is to issue recommendations to implement a common strategy to fight money laundering.
The regulation as it applies has its origins in the FATF Recommendations. These are implemented in the EU by means of directives.
More specifically, the need for a common regulatory framework was realised in 1991 with the adoption of the first anti-money laundering (AML) directive. To date, six AML directives have been adopted and new texts are in preparation.
It should be noted that a European directive does not have direct legal effect. It has to be transposed into national law, so there is a time lag between its adoption and its transposition.
AML/CTF affects several aspects of the law, as well as various state authorities, supervisory bodies and professional organisations.
As a result, the applicable rules come from different sources.
The Law of 12 November 2004 on the fight against money laundering and terrorist financing, as amended (the “Law“) is the cornerstone of the applicable regulation in Luxembourg.
The Law defines the main obligations applicable to AML/CTF, namely: professional obligations (client identification, risk assessment, due diligence, cooperation, monitoring and sanctions).
To understand the Law, it is necessary to bear in mind the following points:
- the Law originally stems from the transposition of the 2nd AML Directive and has been subject to more than fifteen amendments since its entry into force (the various AML Directives have amended it, as well as other laws and sectoral regulations);
- the Law is not sufficient to cover the whole subject. It is necessary to analyse it in relation to other rules applicable to the field of activity concerned.
Specific regulations apply to the various sectors of activity concerned, such as the financial sector, insurance, real estate, the accountancy sector and property dealers (art, car sales).
Sanctions can be administrative or criminal (read more here).
As regards the sanctions applicable specifically to (i) terrorist financing and (ii) money laundering offences, reference should be made to the Criminal Code (respectively to Articles 135-1 et seq. and 506-1 et seq.).
Consequently, in terms of AML/CTF, two observations shall be made:
- given the complexity and legislative changes, internal procedures shall be regularly updated, at the risk of becoming obsolete or incomplete (the last two amendments to the Law date back to 25 March 2020 and 21 February 2021);
- It is not enough to ensure compliance with the general framework set by the Law. It is necessary to consider the sectoral rules that each professional shall apply according to the relevant sector of activity (this involves special laws, circulars, grand-ducal regulations, guidelines and other recommendations).
Many sources are applicable depending on the sector of activity concerned.
Without being exhaustive, it is possible to mention the following texts:
At European level:
- The 4th AML Directive n°2015/849 of the European Parliament and of the Council of 20 May 2015 : text here;
- The 5th AML Directive n°2018/843 of the European Parliament and of the Council of 30 May 2018 : text here;
- The 6th AML Directive n°2018/1673 of the European Parliament and of the Council of 23 October 2018 : text here;
At national level:
- The law of 12 November 2004 on the fight against money laundering and terrorist financing, as amended : coordinated version (last access June 2021);
- The Grand-Ducal Regulation of 14 August 2020 amending the Grand-Ducal Regulation of 1 February 2010 clarifying certain provisions of the amended law of 12 November 2004 on the fight against money laundering and terrorist financing, as amended : coordinated version (last access June 2021);
- The Criminal Code : Official gazette;
- The law of 19 February 1973 concerning the sale of medicinal substances and the fight against drug addiction, as amended : coordinated version of October 2010 (see page 377 and following), subsequent amendments have been made (available here);
- The Act of 13 January 2019 establishing a Register of Beneficial Owners, as amended : coordinated version (last accessed June 2021);
- The law of 10 July 2020 on the register of trusts and fiduciaries, as amended : coordinated version (last access June 2021);
The Commission de Surveillance du Secteur Financier (Financial Supervisory Authority) regularly publishes circulars on AML/CFT matters : Regulatory framework – CSSF;
The website of the Cellule de Renseignement Financier (Financial Intelligence Unit) is also one of the essential sources to consul t: Financial Intelligence Unit;
In addition, each regulated professional is subject to a supervisory authority or a self-policing body. Many details are provided on the respective websites.
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