Following some work with some Professional firms in Luxembourg, I thought I would post this update on the chance that some people missed this VERY IMPORTANT news. This news follows Switzerland’s January 1 adoption of certain tax offences being considered predicate offences to the money laundering offence.

Switzerland

On 1 January 2016 Tax Fraud as Predicate Offense to Money Laundering in Switzerland came into force.

According to the Federal Act of the 2012 FATF Recommendations (FATF-Implementation Act), the amendments to the relevant provisions of both the Swiss Penal Code (PC) and the Anti-Money Laundering Act (AMLA)

As at this date and thereafter, certain tax offences are to be considered predicate offences to money laundering, whether or not these offences are committed in Switzerland or abroad. This qualification means that financial intermediaries will render themselves liable to prosecution if they do not adequately react to these offences. The result being that no later than 1 January 2016, financial intermediaries must have internalised and adapted to the amendments to both the PC and AMLA.

Luxembourg

On 17 February 2017, the Commission de Surveillance du Secteur Financier (“CSSF”), together with the Financial Intelligence Unit (“FIU”) published a circular (hereafter, “the Circular”) providing details on professional duties relating to tax crimes that should be applied.

Publication of Circular 17/650 extending the application of AML/CTF legislation to particular primary tax offences – link below

This circular follows the recent European and National development and legislations ALL aiming to prevent the use of financial systems for the purpose of money laundering and financing terrorism (hereafter: “AML/CTF”), i.e.

• the 2012 FATF revised recommendations,
• the 4th AML directive AND
• The Law of 23 December 2016 is implementing the 2017 Tax reform, as it extends its application to tax crime related to direct and indirect taxes by formerly recognising aggravated TAX FRAUD AND TAX SWINDLE AS PREDICATE OFFENCE.

The Luxembourg Law extends the definition of tax fraud and introduces a distinction between three [3] types of tax fraud with different sanctions and competencies of the administrative and judicial authorities:

• the simple tax fraud,
• *the aggravated tax fraud and
• *the tax swindle.

SANCTION

• The 2 latter crimes* TAX FRAUD AND TAX SWINDLE AS PREDICATE OFFENCE are considered as predicate offences.
• Criminal sanctions and imprisonment (1 month to 3/5 years) and
• fines (between 25.000 EUR and 6/10 times the amount of taxes avoided or reimbursement unduly obtained).

SCOPE AND THRESHOLD

• The range applies to tax crime committed or attempted both in Luxembourg and abroad as long as tax crime would be incriminated in this particular country (dual criminality test).
• The specific thresholds of evaded taxes have been defined by the law of 23 December 2016 for tax offences carried out in Luxembourg, enabling the professional not necessarily to report any suspected transaction to the FIU if the avoided tax amount is below 10.000 EUR.

WHEN AND WHO

• Terminated business relationships as at 31 December 2016 are out of scope.
• From the 1st January 2017 – appropriate customer due to diligence measures MUST BE in place to adequately address tax crime for any new business relationships established AS WELL as for any existing relationships on a risk-based approach basis.
• Dormant accounts have been considered as well in a situation where the account would be reactivated or the assets requested by their successors.

WHAT TO DO

CAPTURE AND VERIFY appropriate information on

• the purpose and nature of the business relationship,

• the origin of the funds/assets to properly evaluate and

DOCUMENT AND VERIFY

• the financial situation of the client,

• CLIENTS compliance with its tax obligations

SCRUTINIZE AND VERIFY

• the transactional activities WITH AN EYE ON THE ABOVE

TRIGGER FOR REPORTING

IT SHOULD BE NOTED –

• Professionals are not under the duty to qualify the tax offence; they just need to have a suspicion.

• The specific thresholds of evaded taxes have been defined by the law of 23 December 2016 for tax offences carried out in Luxembourg, enabling the professional Not Necessarily To Report any suspected transaction to the FIU if the avoided tax amount is below 10.000 EUR.

• To help identify potential tax crimes which may trigger suspicious transaction activity to the FIU accordingly a list of 22 non-exhaustive indicators is provided in Appendix 1 to the Circular.

• It is the presence of one or several of these signs that may trigger a suspicion requiring further analysis from the professionals and appropriate reporting to the FIU if needed.

• The list does not prevent the professional to evaluate each situation/transaction on a case by case basis.

POLICY AND PROCEDURES

• To ensure firms can demonstrate compliance and offer an appropriate defence in the event of an incident being triggered this Circular requires all Luxembourg professionals

• to update their internal procedures and policies with regards AML/CTF to include AGGRAVATED TAX FRAUD AND TAX SWINDLE as a predicate offence of money laundering and
• ensure appropriate due diligence measures are in place AND
• complement these updates with proper training to professional’s employees.

CLOSE

• As stated in the title YOUR TIME HAS COME & WELCOME TO MY WORLD.

• In Jersey and several other jurisdictions that Comsure works, this area of AML has been at the forefront of our business and our support for clients.

• If you can get this right the other CDD tasks become easy…!!!

COMSURE SUPPORT SERVICE

• As always Comsure can assist you further in the implementation of this circular and these new requirements in your existing policy, combining the expertise of OUR EXPERTS.

READ MORE

• Unfortunately for those like myself (English speaker only), the circular is available (only in French) on this link – http://bit.ly/2mETIZJ
• but google translate helped – http://bit.ly/2ninfpc

ORIGINAL POSTED ON – http://bit.ly/2mp5Tcx