European Union: Back To 2018 – Forward To 2019

Last Updated: 12 December 2018
Article by Arendt & Medernach

Banking & Financial Services

Anti-Money Laundering

The Luxembourg legal framework relating to AML/CTF has been substantially reshaped during 2018 with the implementation into Luxembourg law of Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (4th AML Directive). Such implementation is about to be achieved and has been divided into the following seven pieces of legislation:

  • the law of 23 December 2016 relating to the tax reform which introduced enhanced tax fraud and tax swindle as a new predicate offence to money laundering,
  • the law of 13 February 2018 which has substantially amended the law of 12 November 2004 on AML/CTF (Read more...),
  • the law of 1 August 2018 on the access to AML/CTF related information by the national tax authorities,
  • the law of 10 August 2018 on information to be obtained and retained by fiduciary agents (Read more...),
  • the law of 10 August 2018 on the organisation and cooperation of the Financial Intelligence Unit,
  • bill of law 7216B on the register of beneficial ownership in fiduciary arrangements (still under discussion), and
  • bill of law 7217 on the register of beneficial ownership of Luxembourg legal entities arrangements (still under discussion) Read more...

In addition, amendments are expected to be made to CSSF Regulation 12-02 and to the Grand-Ducal regulation of 1 February 2010 in the months to come.

This new legislation is further completed by the risk factor guidelines issued by the ESAs (ESMA, EIOPA and EBA). These guidelines were adopted in Luxembourg via CSSF Circular 17/661 and entered into force on 26 June 2018. In this context the EU Commission also adopted a Delegated Regulation on high risk third countries which has already been amended.

The ESAs Joint Committee has also issued an opinion on the use of innovative solutions in the customer due diligence process as regards the remote verification of customers' identities entailing new risks regarding AML/CTF.

It is worth highlighting that the 4th AML Directive was recently amended by Directive (EU) 2018/843 (5th AML Directive), which must be implemented by Member States before 10 January 2020. The changes introduced by the 5th AML Directive to the registers of beneficial owners have already been, at least partially, reflected in bill of law 7217. Read more...

Furthermore, additional European legislation has recently been published in the Official Journal of the EU: (i) Directive (EU) 2018/1673 on combating money laundering by criminal law which establishes minimum rules concerning the definition of criminal offences and sanctions in the area of money laundering must be implemented by Member States by 3 December 2020, (ii) Regulation (EU) 2018/1672 on controls on cash entering or leaving the Union will apply from 3 June 2021, and (iii) Regulation (EU) 2018/1805 on mutual recognition of criminal asset freezing and confiscation orders will apply from 19 December 2020.

In addition, a draft directive laying down rules facilitating the use of financial and other information for the prevention, detection, investigation or prosecution of certain criminal offences is still pending at EU level.

Finally, a new bill of law 7356 inter alia specifies the definitions of terrorist financing.

Securitisation

Regulation (EU) 2017/2402 laying down a general framework for securitisation and creating a specific framework for simple, transparent and standardised securitisation will apply from 1 January 2019. In this respect, bill of law 7349 grants supervisory and sanctioning powers to Luxembourg authorities.

A proposal for a regulation creates a new type of financial instrument, the "sovereign bond-backed securities" (SBBS) and establishes a secure regime for SBBS transactions. The proposal provides rules for (i) the composition and structure of an SBBS issue, (ii) the notification and transparency requirements for the issuing entity, and (iii) the monitoring by national competent authorities.

Please refer to the section "Insurance Law".

Payment Services Directive 2 (PSD 2)

The law of 20 July 2018 on payment services (the 2018 Law) aims at implementing Directive (EU) 2015/2366 on payment services in the internal market (PSD 2) into Luxembourg law and therefore amends quite substantially the law of 10 November 2009 on payment services (LPS).

According to PSD 2, the 2018 Law pursues the overall objective of ensuring access to the market for new product service providers adapting rules to new and innovative technologies while enhancing the protection of consumers. In this respect, it sets out two new categories of service providers: (i) payment initiation service providers (PISPs) and (ii) account information service providers (AISPs) which are required to obtain authorisation from the Minister of Finance before carrying out their activities and fall within the scope of certain obligations such as set out under the 2018 Law (e.g. information requirements and rules pertaining to data access). As an example of rules which have led to the enhancement of consumer protection, the LPS provides for a new unconditional right to refund for direct debits in relation to non- authorised payment transactions where the payment was initiated by a PISP.

Ranking of unsecured debt instruments in insolvency hierarchy

The law of 25 July 2018 implements Directive (EU) 2017/2399 on the ranking of unsecured debt instruments in insolvency hierarchy into Luxembourg law. It sets forth the debt instruments with lower priority than the claims of unsecured creditors in the event of insolvency and requires the Commission de Surveillance du Secteur Financier (CSSF) to deliver a certificate in the event of establishment of branches in another Member State by a Luxembourg financial institution.

Inactive accounts

A new bill of law 7348 aims at setting out a legal framework regarding inactive bank accounts, safe-deposit boxes and unclaimed insurance policies and provides for specific professional requirements which banks and insurance companies will be subject to in relation thereto. It covers three main pillars, i.e. (i) the prevention and, where necessary, the monitoring of the inactivity of bank accounts, safe-deposit boxes and unclaimed insurance policies through information and research procedures, (ii) the deposit of unclaimed assets at the Luxembourg consignment office (Caisse de consignation) after a fixed time period of inactivity or escheat, and (iii) the restitution of the assets deposited at the Luxembourg consignment office.

The Commissariat aux Assurances (CAA) and the Commission de Surveillance du Secteur Financier (CSSF) are entrusted with supervisory and sanctioning powers for non-compliance with the requirements provided for under bill of law 7348.

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