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

• Publication of Circular 17/650 extending the application of AML/CTF legislation to certain primary tax offences

This circular follows the recent European and national development and legislations 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 recognizing aggravated TAX FRAUD AND TAX SWINDLE AS PREDICATE OFFENCE.

The Law extends the definition of tax fraud and introduces a distinction between three types of tax fraud with different sanctions and competences 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 offence only.
• The amount of the fines is significantly increased.
• Criminal sanctions and sentenced to 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 scope applies to tax crime committed or attempted both in Luxembourg and abroad as long as tax crime would be incriminated in this specific country.

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 properly 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;
  1. the purpose and nature of the business relationship,
  2. the origin of the funds/assets to properly evaluate and

• document AND VERIFY;
  1. the financial situation of the client,
  2. CLIENTS compliance with its tax obligations

• scrutinize AND VERIFY;
  1. the transactional activities WITH AN EYE ON THE ABOVE

TRIGGER FOR REPORTING

• professionals are not under the obligation to qualify the tax offence.
• A list of 22 non-exhaustive indicators is provided in Appendix 1 to the Circular;
  1. to help identify potential tax crimes which may trigger suspicious transaction activity to the FIU accordingly.
  2. It is the presence of one or several of these indicators that may trigger a suspicion requiring further analysis from the professionals and appropriate reporting to the FIU if needed.
  3. The list does not prevent the professional to evaluate each situation/transaction on a case by case basis.

• 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.

POLICY AND PROCEDURES

To ensure firms can demonstate complaince and defence in the event, an incident is triggered this Circular requires all LUX 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 appropriate training to professional’s employees.

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 both Tax and Financial Crime 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