Prevention, detection and treatment of possible suspicious assets held with financial institutions

The Commission de Surveillance du Secteur Financier (CSSF) considers it important to restate the main elements of the legislation the purpose of which is to prevent the Luxembourg financial institutions from holding suspect funds.

Luxembourg was among the first countries to implement a law on the fight against money laundering. First focused on drug trafficking, it was continually extended and aims, today, at funds coming from any offence punished by imprisonment for over 6 months as well as at terrorist financing. The last major update of this law consists in a trilogy of laws dated 27 October 2010. These laws were adopted based on the recommendations issued by the FATF which just confirmed the compliance of the Luxembourg provisions with the FATF rules.

The implemented measures aim first of all at prevention. They impose on financial institutions professional obligations and rules of conduct which they shall observe at all times and on a continuous basis.

In this respect, financial institutions are subject, among others, to customer due diligence obligations and obligations to cooperate with authorities. Before entering into a business relationship or executing a transactions, they shall check the identity of their client or beneficial owner. Afterwards, throughout the relationship with the client, they shall examine its transactions, in particular, as regards the origin of the funds. If they have any suspicion, they shall, on their own initiative, inform the financial intelligence unti of the Luxembourg State Prosecutor’s office (FIU) which may freeze the assets concerned by blocking the suspicious transactions.

Customer due diligence is compulsorily enhanced for clients who are politicians, their family and persons close to them.

Thus, these continuous provisions shall prevent that the suspicious funds of politicians or their circle be kept by Luxembourg financial institutions without waiting for those persons to be subject to international measures following a change of situation in their home country.

If such international measures or sanctions are decided at a political level by the United Nations or by the European Union, these measures are introduced in Luxembourg via EU regulations directly applicable in national law or, as regards the fight against terrorist financing, via the adoption of Ministerial regulations based on one of the three laws of 27 October 2010 and on Grand-ducal regulation of 29 October 2010. If a financial institution has a client subject to such international sanctions, it should apply the sanctions, for example, by freezing, without delay the assets of the client and inform thereof the Minister of Finance.

If appropriate, the suspicious assets held with the financial institutions may also be subject to measures decided in the context of international mutual legal assistance. It is also via judicial means that the outcome of such assets will be settled, for which the owners will have to be determined in court unless the political situation is settled.