The draft Luxembourg law 7216B, already referred to in our February 2018 newsletter, was voted by a first parliamentary vote on 1 July 2020 and finally adopted by dispensation from the second constitutional vote granted by the Council of State on 10 July 2020 (the “Fiduciary Arrangement Law”).
The purpose of the Fiduciary Arrangement Law is to transpose the remaining provisions of Directive (EU) 2015/849 of 20 May 2015 on the prevention of the use of the financial system for the purpose of money laundering (“AML”) or terrorist financing (the “4th AML Directive”), as amended by Directive (EU) 2018/843 of 30 May 2018 (the so-called “5th AML Directive”).
Article 31 of the 4th AML Directive has already been partially transposed by the law of 10 August 2018 on information to be obtained and kept by fiduciary agents (the “2018 Law”), which will be repealed by this law.
The Fiduciary Arrangement Law also takes into account Recommendation 25 of the Financial Action Task Force on transparency and beneficial owners of legal arrangements.
For the purposes of the Fiduciary Arrangement Law, qualifying fiduciary arrangements and trusts are defined by law and shall also include legal arrangements that have a structure or functions similar to that of fiduciary arrangements and trusts defined by law.
Obligation for fiduciary agents and trustees to keep an internal file
Taking over certain provisions of the 2018 Law, the Fiduciary Arrangement Law first provides for the obligations of trustees and fiduciary agents to obtain and retain, at the place of administration of the fiduciary arrangement or express trust, data relating to beneficial owners and to certain other persons specified in the Fiduciary Arrangement Law providing services to or entering into a business relationship with a fiduciary arrangement or an express trust. These obligations arise if the express trust is administered from the Grand Duchy of Luxembourg or in respect of qualifying fiduciary arrangements for which the trustees or fiduciary agents act in such capacities (i.e. even if the latter are not established or resident in the Grand Duchy of Luxembourg). This may include foreign fiduciary arrangements or trusts.
The information shall include the identity of:
- the settlor(s);
- the fiduciary agents or trustees;
- the protector(s), if any;
- the beneficiaries or categories of beneficiaries;
- any other natural person exercising ultimate control over the fiduciary arrangement or trust, as well as basic information on foreign professionals and other foreign law entities that provide certain services to the fiduciary arrangement or trust.
This data will have to be kept for a period of five years by the fiduciary agents and trustees following the termination of their involvement in the relevant fiduciary arrangement or trust.
On request, the fiduciary agents and trustees must supply the above mentioned information, as well as the registration number in the Luxembourg or foreign register of fiduciary arrangements of the relevant fiduciary or trust scheme, to certain named national authorities (e.g. prosecution service, police, supervisory authorities, tax authorities, etc.) and to self-regulating bodies (e.g. bar association, auditors’ association, etc.). Certain professionals of the financial sector (e.g. credit institutions, insurance companies, fund entities, auditors, lawyers, etc.) may also request the above mentioned information (except the information on service providers) if they become a fiduciary agent or trustee or execute a transaction with such entities. Additionally, such professionals may ask for information regarding the assets held by the fiduciary arrangements or trusts in the context of their AML obligations.
Register of fiduciary arrangements and trusts
In addition, the Fiduciary Arrangement Law seeks to establish a register of fiduciary arrangements and trusts (the “Register”) maintained by the Administration de l’Enregistrement, des Domaines et de la TVA (“AED”) in which trustees and fiduciary agents will be required to enter certain data that they are obliged to collect under the legislation.
The registration of the relevant information in the Register is required for:
- any fiduciary arrangement or express trust of which a fiduciary agent or trustee is established or resident in the Grand Duchy of Luxembourg; and
- any fiduciary arrangement or express trust of which the fiduciary agent or the trustee is not established in the Grand Duchy of Luxembourg or in another Member State, where the fiduciary agent or trustee, on behalf of the fiduciary arrangement or trust, enters into a business relationship in the Grand Duchy of Luxembourg with a professional or acquires real estate located in the Grand Duchy of Luxembourg.
The fiduciary agents or trustees established or resident in different Member States will be deemed to have satisfied their registration obligation when they submit to the AED proof of their registration in an equivalent register for any fiduciary arrangements or express trusts qualifying under the Fiduciary Arrangement Law.
The information to be registered with the Register includes information on the fiduciary arrangements and trusts (including name, denomination), controlling interests held by the fiduciary arrangements and trusts as well as information on the beneficial owners of the fiduciary or trust scheme.
Access to the Register
The Register may be accessed by national authorities and self-regulating bodies as well as professionals in the context of the application of customer due diligence measures.
Access to certain more restricted information in the Register may be granted on a case by case basis to any natural or legal person who demonstrates a legitimate interest in the context of AML measures.
The Fiduciary Arrangement Law provides that failure to comply with the new requirements could lead to, inter alia, administrative fines of up to twice the amount of the benefit derived from the infringement, where such amount can be determined, or of up to a maximum of EUR 1,250,000.00.
Entry into effect
The Fiduciary Arrangement Law was published in the Mémorial A on 13 July 2020 and will enter into effect on 17 July 2020.