Luxembourg Plans To Give Its Business Registry More Teeth
After having been criticized for being a tax haven, Luxembourg’s Ministry of Justice will put forward a draft bill aimed at allowing authorities to sanction those who use the country’s financial system for money laundering and tax evasion.
OpenLux investigations, revealing how the country’s opaque financial system allows criminals and the corrupt to avoid taxes and launder their proceeds of crime.The move comes six months after a group of international journalists, coordinated by OCCRP, published their
“I can confirm that the Minister of Justice will submit to the government a draft bill allowing the Luxembourg Business Register (LBR) to impose administrative sanctions,” Luxembourg Ministry of Justice Press Attaché Monique Feidt told OCCRP.
For now, however, it seems the details are still being ironed out, as they will not be made public until the draft bill has been adopted by the government and presented to the Justice Committee of the Chamber of Deputies, said Feidt.
It is believed that non-Luxembourg residents will need to provide the LBR with identification documents such as passports or identity cards, according to Reporter. While this provision may be initially voluntary, it could become mandatory at a later date, the paper said.
It noted that the Justice Ministry is planning to double the number of its employees in order to better monitor the process.
If passed, the law will grant the LBR the power to impose sanctions and relieve the country’s justice system in cases where the registry is abused.
The OpenLux investigation revealed that in several cases a child, a deceased person, or an otherwise obvious proxy was listed in the LBR as the Ultimate Business Owner (UBO) of a company. The UBO is the legal owner who stands to profit or benefit from a corporate entity.
Luxembourg established its LBR in 2019 but it was found to have a critical flaw in that it does not allow searches by an owner’s name, only by the company name or registration number. This makes it really hard for anyone who seeks to link a corporate entity to those who profit off of it.
But, this may be exactly the reason why many choose to register in Luxembourg.
Gabriel Zucman, an associate professor of the University of California, stated that “disconnecting people from their assets, creating financial opacity, and making it harder for authorities to investigate” is an attractive service to be exploited within Luxembourg’s financial industry.
During their investigation, journalists analyzed over three million documents obtained by Le Monde. They found that people who used proxy UBOs included: an arms dealer at the center of one of the biggest corruption scandals in France; a Kremlin-connected leader of one of the largest Russian criminal organizations; as well as several members of the ’Ndrangheta, Italy’s most powerful criminal group.
Reporter cited a Luxembourg ministry spokesperson saying authorities will respond to these findings with a “vertical assessment of money laundering and terrorist financing risks.”
The draft is supposed to be a step towards changing Luxembourg’s international image as “an offshore hub in the heart of Europe.”