Luxembourg, a major world financial center, hosting more than 144 international banks which operate as “universal banks” with an unrestricted range of activities, Luxembourg is a tax haven due to its banking secrecy, absence of exchange controls, lack of withholding tax on interest, and politically stable environment. However, banking secrecy does not apply in criminal cases, including money laundering.
Government officials acknowledge that narcotics money laundering occurs, but they do not consider Luxembourg more of a center for such activity than other places with highly developed banking systems. Virtually all recent money laundering cases involved funds introduced into the world financial system elsewhere (usually from within Europe) which were then transferred to Luxembourg for layering or integration. In all money laundering cases, Luxembourg law holds bankers personally liable if they fail to establish the bona fides of the beneficial owners of funds when they are received. The Monetary Institute has stepped up its efforts to police the banks’ anti-money laundering performance.
There have been no indications that the non-banking financial sector has been involved in money laundering. The government continues to closely monitor non-bank institutions, such as building companies, real estate agencies, jewelry stores, art galleries, and antique dealers.
Under Luxembourg’s financial sector law of April 10, 1993, bankers and other financial dealers are required to keep documents or information on transactions for at least five years. The 1993 law also requires financial sector professionals to report suspicious transactions to the public prosecutor. exchange dealers, lawyers, notary publics, and bankers who handle securities are under the same obligation. As stated above, the first annual report on banks’ performance of the duty to report “suspicious transactions” was published in March 1995.
Bankers are criminally responsible if their institution knowingly launders drug money. Client identity must be verified for transactions exceeding 500,000 Luxembourg francs (approximately usdols 16,000 at the current rate of exchange). The 1993 law protects from criminal or civil prosecution under Luxembourg’s bank secrecy law those financial professionals who in good faith provide information on clients to the Authorities. There are no controls on money brought into or taken out of the country.
Luxembourg law provides for asset forfeiture in criminal cases, and the first funds to be forfeited occurred in 1994. Forfeiture can follow a finding that the assets to be forfeited were involved in narcotics- related money laundering or following criminal conviction. It remains unclear whether Luxembourg courts will enforce civil forfeiture orders from elsewhere, because the concept of civil forfeiture does not exist in Luxembourg law. In criminal matters, seized funds cannot be forfeited directly under pre-1992 Luxembourg law, which requires a criminal conviction in order for the money to be forfeited. There were no major seizures in 1995.