Clifford Chance
New Luxembourg law on implementation of restrictive measures in financial matters
Restrictive measures in financial matters have just been reviewed in Luxembourg in order to integrate U.N. and E.U. progress in this area into national legislation.
The regime of restrictive measures (or sanctions) was until now governed by the Law of 27 October 20101, as well as its implementing Grand-Ducal Regulation of 29 October 2010 (as amended).
These provided the legal framework for the implementation of financial sanctions, mainly with a view to fighting terrorism financing.
They have now been repealed by the law of 19 December 2020 relating to the implementation of restrictive measures in financial matters, published on 23 December 20202 and entered into force on 27 December 2020.
What are the main new features?
First of all, the prior law of 2010 focused on the fight against the financing of terrorism via restrictive measures. The new law purports to include the fight against the financing of the proliferation of weapons of mass destruction, the fight against violations of international law, as well as the safekeeping of international security and peace.3
Second, the scope of persons covered by the new law is also extended. Restrictive measures are binding upon natural and legal persons of Luxembourg nationality, residing or operating on or from Luxembourg territory or abroad. From now on, they are binding also on branches of Luxembourg legal persons established abroad, and/or branches in Luxembourg of foreign legal persons, as well as on all other natural and legal persons operating in Luxembourg.
Similarly, the protection of persons disclosing to the authorities, in good faith, information necessary for the enforcement of restrictive measures, is also broader. Under the law of 2010, only 'professionals', their employees or their officers were covered. Now, any 'person' is covered by the relevant protection.
Furthermore, the law of 2020 also introduces new definitions to clarify its provisions, notably those of 'internal' and 'external' security, reflecting the law's new objectives of protecting inter alia international peace and security.
Restrictive measures may forthwith be taken via a Grand-Ducal Regulation, in order to defend national and external security or national 'vital interests', while awaiting formal decision-making at UN or EU level. Said restrictive measure will be valid for a maximum period of 60 days, with its effects expiring automatically at the end of this period, except in the case of a duly motivated extension for periods of 30 days.
The law also introduces a new scope for the key definition of 'restrictive measures in financial matters'. The latter thus comprise three things:
- Prohibition or restriction of financial activities of any kind;
- Prohibition or restriction on the provision of financial services, technical assistance, training or advice in relation to a State, natural or legal person, entity or group subject to restrictions; and/or
- Freezing of funds, assets or other economic resources owned or controlled, directly, indirectly or jointly, with or by a person, entity or group subject to restrictions, or by a person acting on their behalf or at their direction.
Additional powers have been granted to supervisory authorities and self-regulatory bodies, namely and significantly, the same powers as the powers available to them in the area of the fight against money laundering and terrorist financing, in order to strengthen the effectiveness of the sanctions regime.
Finally, the penalties for non-compliance with restrictive measures have been significantly increased. Whereas the 2010 law provided for a fine of EUR 251 to EUR 250,000, the new law of 2020 provides for a penalty ranging from EUR 12,500 to EUR 5,000,000. In addition, if the offence has resulted in significant financial gain, the fine may be increased to four times the amount at stake. The severity of these sanctions will certainly reinforce the willingness to combat any infringements of restrictive measures.
The new provisions included in the law of 19 December 2020 thus enable Luxembourg to present a stronger and more developed legislative framework for the implementation of restrictive measures.
Please contact any of the team members on the right about further questions, and/or for information about our Regulatory, Investigations and Financial Crime practice.
1. On the implementation of United Nations Security Council Resolutions and acts adopted by the European Union containing prohibitions and restrictive measures in financial matters against certain persons, entities and groups in the context of the fight against terrorist financing (http://legilux.public.lu/eli/etat/leg/loi/2010/10/27/n3/jo).
2. Mémorial A n° 1072 (http://legilux.public.lu/eli/etat/leg/loi/2020/12/19/a1072/jo).
3. See the parliamentary works to the draft bill n° 7395 (https://www.chd.lu/wps/portal/public/Accueil/TravailALaChambre/Recherche/RoleDesAffaires?action=doDocpaDetails&backto=/wps/portal/public/Accueil/Actualite&id=7395), including document n° 7395/11, p. 2.
