The European Union's Directive 2015/849, better known as the 4th Anti-Money Laundering Directive, regulates prevention of the use of the financial system for the purposes of money laundering or terrorist financing, which includes, among other things, the obligation on EU Member States to create a register of beneficial ownership as well as a register on trusts. Luxembourg implemented first the register of beneficial ownership on 13 January 2019. The law of 10 July 2020 (the 2020 Law), which came into force on 17 July 2020, implements the register of fiducies and trusts (the RFT) and creates obligations relating to fiducies and trusts in the context of the fight against money laundering or terrorism financing.
Scope of the 2020 Law
In Luxembourg, a “trust” is defined by reference to Hague Convention of 1 July 1985, and a “fiduciary” is defined as “a contract within the meaning of the present title is a contract by which a person, the fiduciant, agrees with another person, the fiduciary, that, subject to the obligations determined by the parties, the fiduciary becomes the owner of assets which shall form a fiduciary property.” As a rule, a fiduciary/trustee becomes the owner of assets and the assets under a fiduciary contract are segregated from the fiduciary's personal assets and can only be claimed by creditors who have rights over them.
The 2020 Law applies to trusts, fiducies, express trusts or assimilated arrangements (together referred to as Trust Arrangements):
- Managed by a trustee or fiduciaire established or domiciled in the Grand Duchy of Luxembourg;
- Established or domiciled in the Grand Duchy of Luxembourg whether its trustee or fiduciaire is established or domiciled in the Grand Duchy of Luxembourg or in another Member State; and
- Established in a third country to the extent the fiduciaire or trustee either:
- Enters into a business relationship with a professional in Luxembourg, “professionals” referring to credit institutions, professionals of the financial sector, financial institutions carrying out their activities in Luxembourg, insurance undertaking licensed or authorised to exercised their activities in Luxembourg, professionals of the insurance sector, pension funds under the supervision of the Commissariat aux Assurances (CAA) or the Commission de Surveillance du Secteur Financier (CSSF), SICARs, AIFMs, managers and advisors of SICARs and pension funds, securitisation undertakings, persons carrying out family office activities, statutory auditors and audit firms, accountants and accounting professionals, real estate agents and developers, notaries and lawyers, bailiffs, persons who exercise an activity of tax advice in Luxembourg, persons who exercise on a professional basis in Luxembourg a trust and company service provider activity, provider of gambling services, virtual asset service providers, persons trading in goods or the trade of works of art; or
- Acquires a real estate asset in the Grand Duchy of Luxembourg,
In each case, as well as their beneficial owners and professionals within the meaning of the AML 2020 Law (Professionals), who enter into business relationships with such Trust Arrangements.
Any Trust Arrangement established or residing in the Grand Duchy of Luxembourg shall be registered on the RFT.
When the trustee or fiduciaires and the Trust Arrangement are established in different Member States, the production of an attestation evidencing that the Trust Arrangement is registered with an equivalent register implemented in another member state or an extract of the information on beneficial owners kept in such register will be sufficient to comply with this obligation.
New obligations relating to trusts and fiducies
Trustees or fiduciaires of a Trust Arrangement managed in Luxembourg must obtain and hold, at the place of management of such Trust Arrangement, adequate, exact, and up-to-date information on their beneficial owners, which include the identity of:
- The constituent(s);
- The trustee(s) or fiduciaire(s);
- The protector(s) (if any);
- The beneficiaries or category of beneficiaries; and
- Any other natural person having effective control over the Trust Arrangement.
Trustees or fiduciaires must also keep basic information on any Professional or foreign legal entity that, if domiciled in Luxembourg, would be considered as a Professional with whom the Trust Arrangement enters into a business relationship or who provides services to the Trust Arrangement.
The above information as well as (i) an attestation evidencing that the Trust Arrangement is registered with an equivalent register implemented in another member state or (ii) an extract of the information on beneficial owners kept in such register, shall be provided to:
- National authorities upon request; and
- Professionals when entering into a business relationship with them.
This is an ongoing obligation on the trustees or fiduciaires which shall continue for 5 years after the end of their involvement with the Trust Arrangement.
The CAA, the CSSF and self-regulating bodies, each with respect of the entities they supervise, and the Administration de l’Enregistrement des Domaines et de la TVA (AED) for all others will monitor the compliance by the trustees, fiduciaires, and Professionals with the obligations set out by the 2020 Law.
The AED can request any beneficial owners or Professionals to provide the information required, and impose a daily fine of up to EUR 1,250 for a failure to comply with formal request, up to a maximum amount of EUR 25,000.
Self-regulating bodies may impose administrative sanctions on the trustees or fiduciaires, including fines of up to EUR 1,250,000 or the publication of their identity and nature of the breach. Any person who does not comply with the injunction to provide their information or knowingly provided inaccurate or incomplete information may be fined between EUR 250 and EUR 250,000.
Register of Fiducies and Trusts
Pursuant to the 2020 Law, the AED will establish a Register of Fiducies and Trusts to record and make available certain information regarding any Trust Arrangement.
What is filed with the RFT?
Each Trust Arrangement registered on the RFT will be attributed a unique registration number. The registration shall be made by electronic means and should take place within one month from the creation of the Trust Arrangement or the change to any of the information filed with the RFT.
The information to be filed with the RFT includes:
- Identification number;
- Denomination of the Trust Arrangement;
- Date of creation of the Trust Arrangement;
- Information on each beneficial owner of the Trust Arrangement; and
- Disclosure if the Trust Arrangement holds a direct or indirect controlling participation in a legal entity, amongst other by way of bearer shares or any other means of control, that is not established in a Member State and register on a register of beneficial owners in accordance with the 4th Anti-Money Laundering Directive.
Who can see information filed with the RFT?
National authorities as well as the self-regulating bodies, in the exercise of their mission in relation to the fight against money laundering and financing of terrorism, have access to the information filed with the RFT.
Access shall also be granted to any person who can evidence a legitimate interest in the context of the fight against money laundering and financing of terrorism or the use of the financial system for such purposes.
As for the register of beneficial ownership (RBE), access to the information filed with the RFT on a beneficial owner may be restricted to national authorities, national self-regulating bodies, credit institutions and other financial institutions, bailiffs (huissiers) and notaries (acting in their capacity as public officer) should the access by any other person would expose the beneficial owner to a disproportional risk, a risk of fraud, kidnapping, blackmail, extorsion, harassment, violence or intimidation or if the beneficial owner is a minor or under administration.
Based on current practice with the RBE, we would expect this limitation to access information on beneficial owners to be granted in exceptional circumstances only, to be assessed on a case-by-case basis for any case other than where the beneficial owner is a minor or under administration.
For further information on the requirements to file with the RFT, please feel free to get in touch with us.