Fight against money laundering and counter terrorist financing (AML/CTF)
What does "money laundering" mean?
Money laundering is defined as an offence which consists of knowingly facilitating, by any means whatsoever, the misleading justification of the origin of the direct or indirect income of the predicator of a crime or an offence as defined under Article 506-1 of the Penal Code. Money laundering is thus the process of making criminal funds appear to be of legitimate origin.
Moreover, the offence includes knowingly participating in an investment, dissimulation, disguise, transfer or conversion transaction of property constituting the object or the direct or indirect proceeds of a predicate offence or constituting a pecuniary benefit of any nature whatsoever from one or several of these offences.
Anyone having acquired, held or used the property constituting the object or the direct or indirect proceeds of a predicate offence or constituting a pecuniary benefit of any nature whatsoever from such predicate offence, knowing, at the time s/he received them, that they originated from one or several of the predicate offences or from the participation in one or several of these offences, shall be punishable for money laundering.
The money laundering offence is punishable by imprisonment and/or a pecuniary penalty.
The introduction of criminal money into the financial system is one of the money laundering methods used by criminals. There is, therefore, a risk that professionals of the financial sector are used for the purpose of money laundering. In order to avoid that money launderers take advantage of the financial system to facilitate their criminal activities, Luxembourg, as well as a large number of other States, imposed certain internationally agreed professional requirements on institutions of the financial sector operating in Luxembourg. Amongst these requirements, it is worth mentioning the following:
- identifying the customers (including beneficial owners);
- performing continued monitoring (on customers and transactions);
- keeping appropriate records;
- establishing internal procedures to train staff members to recognise money laundering and to report any indications of money laundering to the competent authorities.
These professional requirements aim to allow an efficient fight against money laundering (but also against terrorist financing, cf. below) and against crime in general. They also aim to ensure the stability and reputation of the financial sector in general and in particular of the professionals of the financial sector.
What does money laundering “primary offence” or “predicate offence” mean?
Crimes or offences which generate the funds to be laundered are commonly referred to as money laundering primary offences or predicate offences.
Primary offences include illicit trafficking of narcotic drugs, acts of terrorism or terrorist financing, corruption, weapons trafficking, criminal organisation or criminal association, certain tax offences, trafficking in human beings, sexual exploitation, including of children, kidnapping, illegal detention and hostage-taking, fraud and scam, environmental crimes and offences or counterfeiting of money.
In general, any offence punishable by a minimum term of imprisonment of at least six months is considered as a money laundering primary offence.
The money laundering offence committed in Luxembourg is punishable in Luxembourg, even if the primary offence was committed abroad.
What does "terrorist financing" mean?
An act of terrorism, as defined in Article 135-1 of the Penal Code, refers to any crime or offence which may, by its nature or context, seriously damage a country, an international organisation or body, and which has been committed with the intention of intimidating the population, compelling public authorities to do or abstain from doing any act or destabilising or destroying the structures of a country.
Terrorist financing is defined in Article 135-5 of the Penal Code notably as the unlawful and wilful provision of funds, assets or goods of any nature, with the intention that they should be used or in the knowledge that they are to be used in order to carry out an act of terrorism, even if they have not actually been used for that purpose.
Terrorism and terrorist financing are autonomous offences which are punishable the same way as money laundering, but which also constitute primary offences to money laundering. The same applies to certain acts linked to terrorism, such as acts of provocation, terrorist recruitment or training, which are henceforth punishable by criminal law under certain conditions.
As autonomous offences, acts of terrorism and terrorist financing are offences or crimes which are punishable by imprisonment and/or a fine.
What are the fraud mechanisms to which investors may be directly exposed?
Various fraud mechanisms exist and imply notably IT frauds, pyramidal mechanisms or so called CEO frauds.
Who can the investor/customer contact in the event of a prejudice?
If an investor/customer suffers a prejudice, in particular through one of the fraud mechanisms described above or in relation to a money laundering offence (excluding terrorist financing offences, for which only the Luxembourg district authorities are competent), the investor/customer may lodge a complaint in the hands of the State Prosecutor with the Tribunal d’arrondissement (District Court) of Luxembourg, at the following address:
Parquet de Luxembourg
or in the hands of the State Prosecutor with the Tribunal d’arrondissement (District Court) of Diekirch, at the following address:
Palais de Justice op der Kluuster
The investor may also lodge a complaint directly in the hands of the investigating judge (juge d’instruction) with the Tribunal d’arrondissement (District Court) of Luxembourg or Diekirch. The complaint in the hands of the investigating judge implies a civil action. Such a complaint may be lodged at the following address:
Cabinet d’instruction de Luxembourg
Cabinet d’instruction de Diekirch
Tribunal d’arrondissement de Diekirch
The investor may also address his/her complaint to any police station or even to the General Police Directorate. Contact details of the various police services are available on the police’s website.
Further information on the filing of a complaint are available on the website www.justice.public.lu, under “Affaires pénales – Dépôt de plainte”.
For further information on this topic, notably on examples of fraud mechanisms, please refer to our FAQs on AML/CFT.