LUXEMBOURG: Jurisdiction to give business registrar more teeth.

As published on namibian.com.na, Monday 6 September, 2021.

AFTER being criticised for being a tax haven, Luxembourg's justice ministry 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.

This move comes six months after a group of international journalists, coordinated by the Organised Crime and Corruption Reporting Project (OCCRP), published their OpenLux investigations, revealing how the country's opaque financial system allows criminals and the corrupt to avoid taxes and launder the proceeds of their crimes.

“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's justice ministry spokesperson, Monique Feidt, says.

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, she says.

It is believed that non-Luxembourg residents would need to provide the LBR with identification documents, such as passports or identity cards, The Reporter says.

While this provision may initially be voluntary, it could become mandatory at a later date, the paper says.

It noted that the justice ministry is planning to double its number of employees to better monitor the process.

If passed, the law would 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 of a company, who stands to profit or benefit from a corporate entity.

Luxembourg established its LBR in 2019, but was found to have a critical flaw in that it does not allow searches under an owner's name, but only under the company's name or registration number.

This makes it really hard for anyone who seeks to link a corporate entity to those who profit from it.

This may be why many choose to register in Luxembourg.

Gabriel Zucman, an associate professor of the University of California, says “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 analysed over three million documents obtained by Le Monde.

They found that people who used proxy UBOs included an arms dealer at the centre of one of the biggest corruption scandals in France, a Kremlin-connected leader of one of the largest Russian criminal organisations, as well as several members of the 'Ndrangheta, Italy's most powerful criminal group.

The Reporter cited a Luxembourg ministry spokesperson saying authorities would 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”.

* Organised Crime and Corruption Reporting Project

UK: London warned of risk of l…