Luxembourg Fiduciary Contracts and Trusts Register: Time to get prepared

The Luxembourg law of 10 July 2020 (the "Trust Register Law") establishing a Luxembourg Register of fiduciary contracts and trusts (the "Trust Register") will enter into force on 17 July 2020.

The Trust Register Law fully implements article 31 of the European Directive (EU) 2015/849, as amended by European Directive (UE) 2018/843, on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing. Article 31 of Directive (EU) 2015/849 was in part already transposed by the Law of 10 August 2018 relating to information to be obtained and kept by fiduciaries. In order to avoid two separate laws implementing the same article at the national level, the Law of 10 August 2018 is repealed by the Trust Register Law.

The Trust Register Law also takes into account Recommendation 25 of the Financial Action Task Force (FATF) on transparency and beneficial owners of legal arrangements.

The Trust Register Law is split into two main parts:

  • First, the obligation of trustees and fiduciaries to obtain and retain data relating to beneficial owners of express trusts (trusts exprès) and fiduciary contracts and other persons specified in the Trust Register Law. This part reflects the content of the then repealed Law of 10 August 2018, it being understood that the Trust Register Law implements amendments brought by the European Directive (EU) 2018/843.
  • Second, the establishment of the Trust Register maintained by the Registration Duties, Estates and VAT Authority (l’Administration de l’enregistrement, des domaines et de la TVA) (the "AED"), the filing of information relating to the fiduciary contracts / trust and their beneficial owners with the Trust Register and the access of such information once filed.

A Grand-Ducal regulation shall be passed to provide for the technical / practical aspects regarding the functioning of the Trust Register.

What are the fiduciary contracts or Trusts that must be registered with the Trust Register?

Type of fiduciary contracts and trusts

Fiduciary contracts are those governed by the law of 27 July 2003 relating to trusts and fiduciary contracts as amended (the "2003 Law").

Trusts refer to trusts within the meaning of the Hague Convention on the law applicable to trusts and on their recognition which was approved by Luxembourg pursuant to the 2003 Law. In addition the Trust Register Law specifies that the trust must be an express trust (trust exprès), meaning a trust expressly created by a settlor by way of a (written) instrument as opposed to a trust created as a matter of law without the clear intention or decision of a settlor to create one.

The Trust Register Law further provides that it applies also to legal arrangements which have a structure or functions similar to a fiduciary contracts or a trust.

Geographical scope of application

A fiduciary contract / trust must be registered with the Trust Register if its fiduciary / trustee is established or resides in the Grand Duchy of Luxembourg.

If there are several fiduciaries / trustees established or residing in various Member States, including the Grand Duchy of Luxembourg, the requirement to be registered with the Trust Register is deemed met if the relevant fiduciary contract / trust is already registered with an equivalent register of another Member State. Evidence of such registration with another Member State register will have to be given to the AED.

Where a fiduciary / trustee is not established or does not reside in either the Grand Duchy of Luxembourg or any other Member State, a fiduciary contract / trust must still be registered with the Trust Register if the relevant fiduciary / trustee, in the name of a fiduciary contract / trust, enters into a business relationship in the Grand Duchy of Luxembourg with a professional as defined in article 2 of law of 12 November 2004 on the fight against money laundering and terrorist financing, as amended (the "2004 Law") or acquires a real estate property located in the Grand Duchy of Luxembourg. Assuming the same fiduciary / trustee enters into multiple business relationships in several Member States, the requirement to register the fiduciary contract / trust will be deemed met if it has already been registered with an equivalent register of another Member State. Evidence of such registration with another Member State register will have to be given to the AED.

Who is responsible for the filing of the information with the Trust Register?

The fiduciary of the relevant fiduciary contract or trustee of the relevant trust.

What information on the fiduciary contracts / trusts must be filed with the Trust Register?

The following information relating to a fiduciary contract / trust must be filed with the Trust Register:

  • registration number – such number is assigned by the system upon registration of the fiduciary contract / trust;
  • name of the fiduciary contract or the trust, if applicable;
  • date of establishment of the fiduciary contract or the trust;
  • whether the fiduciary contract / trust holds or has a controlling interest in a company or other legal entity, other than those being registered with the Ultimate Beneficial Owner Register established by the Luxembourg law of 13 January 2019 (or an equivalent register of another Member State).

Who are the Ultimate Beneficial Owners ("UBOs") of Fiduciary contracts / Trusts?

The UBOs of a fiduciary contract / trust are defined in article 1, item 7 of the 2004 Law and refer to:

  • the settlor(s);
  • the trustee(s) or fiduciaries;
  • the protector(s), if any;
  • the beneficiaries or category of beneficiaries; and
  • any other natural person exercising ultimately control over the fiduciary contract / trust.

What information about the UBOs of a fiduciary contract / trust must be filed with the Trust Register?

For each UBO of a fiduciary contract / trust, the following information about the UBO must be registered with the Trust Register:

  • in the case of a natural person:
    • last name;
    • first name;
    • citizenship;
    • date and place of birth;
    • country of residence;
    • private or professional address;
    • national identification number (or foreign identification number); and
    • nature and extent of the interests held in the fiduciary contract or the trust.
  • in the case of a legal person:
    • corporate name
    • address of the registered office
    • registration number (and name of the register, if it is registered with a foreign register) and;
    • nature and extent of the interests held in the fiduciary contract or the trust.

The only exception to the filing of such detailed information is with respect to beneficiaries of the fiduciary contracts / trusts that are identified / designated by characteristics or category, in which case a description of such characteristics or category must be filed with the Trust Register.

When must the filing be made?

As opposed to the law of 13 January 2019 establishing the Ultimate Beneficial Owner Register, the Trust Register Law does not provide for a specific transition period. As a result, and pursuant to article 15 of the Trust Register Law, fiduciaries / trustees of fiduciary contracts / trusts that must be registered with the Trust Register will have one month, as from 17 July 2020, to proceed with the filing.

A Grand-Ducal regulation shall provide for the relevant technical details of the Trust Register. At the date of this article, no such regulation has been published.

Information filed with the Trust Register must be accurate and up-to-date. Any change on the information, including the termination of the fiduciary contract / trust, must be filed with the Trust Register within a month of the relevant event.

How long will the information be kept with the Trust Register?

The information mentioned above relating to the fiduciary contract / trust must be kept with the Trust Register until five years after the termination of the fiduciary contract / trust or after the conditions provided by the Trust Register Law requiring the registration of the same fiduciary contract / trust have ceased to exist.

The information mentioned above relating to the UBO of the fiduciary contract / trust must be kept by the Trust Register until  five years after the relevant person has ceased to be a UBO.

Who has access to the information filed with the Trust Register?

The public in general does not have access to information filed with the Trust Register.

The following persons have full access to the information filed with the Trust Register:

  • the Luxembourg national authorities, as defined in the Trust Register Law, such as the public prosecutor, investigating judges, the Cellule du Renseignement Financier (CRF), the AED and the Administration des Contributions Directes, the Commission de Surveillance du Secteur Financier (CCSF) and the Commissariat aux Assurances (CAA);
  • self-regulatory bodies (organismes d'autorégulation) as defined in the 2004 Law, such as e.g. the Chambre des Notaires; and
  • The professionals within the meaning of the 2004 Law for the purpose of performing their obligations under article 3 to 3-3 of the 2004 Law.

Other natural or legal persons are authorised to have access to certain information relating to the UBOs of a fiduciary contract / trust only if they demonstrate a legitimate interest in the context of preventing the use of the financial system for the purposes of money laundering or terrorist financing. The request must comply with certain requirements and may concern only one fiduciary contract / express trust at a time. The decision of the AED to grant access is given on a case by case basis.

Can a UBO restrict the access to the information filed with the Trust Register? 

UBOs can request that their information shall not be shared with persons other than the Luxembourg national authorities, the self-regulatory bodies, credit and financial institutions, and bailiffs and notaries (when acting as public officers), if they can demonstrate that the disclosure of their information to those other persons would be a major threat to their personal security and would expose them to a disproportionate risk, to a risk of fraud, kidnapping, blackmail, extortion, harassment, violence or intimidation, or if the UBO is a minor or is otherwise incapacitated.

Upon submission of the request, the AED has to temporarily restrict access to the information so that only national authorities, credit or financial institutions, and bailiffs and notaries (when acting as public officers) are given access.

If the AED accepts the request to restrict the access to information, it may only be for the period necessary to safeguard the UBO's interest mentioned above and, in any event, for a maximum period of 3 years. Such period may be renewed by submitting a new request.

If the request is not granted, a UBO has two recourses to choose from:

  • an ex gratia appeal (recours graçieux de droit commun);
  • a reversal on appeal (recours en réformation) opened before the administrative court. It must be lodged within one month of the notification of the refusal of the request.

The access to the relevant information remains restricted until the decision of the AED is no longer subject to any legal recourse.

What are the obligations of the UBOs of a fiduciary contracts / trusts?

The Trust Register Law expressly provides that the UBOs have to provide the fiduciaries / trustees with any information necessary for them to comply with their obligations to file information with the Trust Register. The AED has the right to order the UBOs to comply with such obligations.

What is the procedure for the filing and the rights of the AED in relation thereto?

Based on our discussion with the AED, the filing process will be made through the platform www.guichet.public.lu.

The AED is responsible for safeguarding, administering and making available the UBO information on fiduciary contracts and trusts.

AED is not responsible for the content of the registered information.

The communication between the AED and the fiduciaries / trustees as well as the consultation will be made exclusively electronically.

The AED will not accept any incomplete request for registration submitted by the fiduciary / trustee. In case of refusal the applicant will have 15 days to comply.

The AED has the right to have access and receive copies of all information relating to a fiduciary contract and a trust that must be registered with the Trust Register and to obtain from the relevant Luxembourg authorities the information they have on the UBO of a fiduciary contract / trust which must be registered with the Trust Register.

The AED has also the right to order fiduciaries / trustees to update information filed with the Trust Register and to stop wrongful behaviour regarding the fiduciaries' / trustees' filing obligations.

What are the costs linked to the Trust Register?

The Trust Register Law only provides that fees must be paid for certain persons requesting access to information. The exact amounts shall be specified in a Grand-Ducal regulation.

What are the sanctions provided for by the Trust Register Law?

Sanctions that may be incurred by the fiduciary/trustees with respect to their filing obligations

The AED may impose the payment of a penalty in order to force fiduciaries / trustees to comply with the AED's injunction regarding their obligation to file / update information with the Trust Register in a timely fashion or to stop knowingly filing incomplete or incorrect information. The amount of the penalty may not exceed EUR 1,250 per day and, in aggregate, EUR 25,000.

If the fiduciaries / trustees fail to comply with the above mentioned injunction, the AED may further order a fine of EUR 250 to EUR 250,000.

In addition, fiduciaries / trustees (including their managers and/or relevant staff member) may face the following sanctions for not providing or updating the information filed with the Trust Register in a timely fashion or for knowingly providing incomplete or incorrect information:

  • a warning;
  • a reprimand;
  • a public statement specifying the identity of the natural or legal person and the nature of the violation;
  • administrative fines of up to twice the amount of the benefit derived from the violation, if this can be determined, or a maximum amount of EUR 1,250,000.

Sanctions that may be incurred by the UBOs

The AED may impose the payment of a penalty in order to force a UBO to comply with the AED's injunction to provide information to the fiduciary / trustee. The amount of the penalty may not exceed EUR 1,250 per day and, in aggregate, EUR 25,000.

If the UBO fails to comply with the above mentioned injunction, the AED may further order a fine of EUR 250 to EUR 250,000.

Sanctions that may be incurred by those having access to the information filed with the Trust Register

Any natural or legal person who has used the information to which they have had access for purposes other than those for which such access was granted in accordance with the Trust Register Law may incur a fine of EUR 1,250 to EUR 1,250,000.

What changes for professionals subject to the 2004 Law (the "Professionals"), such as banks, notaries, lawyers?

Easier UBO identification?

The information made available (and in principle being accessible to the Professionals) through the Trust Register should simplify the client due diligence process and allow a quicker access to the information. However, the Professionals are not allowed to solely rely on the information published in the Trust Register and have to conduct additional enquiries/investigations in order to comply with their client due diligence requirements.

The fiduciaries / trustees shall provide information about the UBOs to the Professionals for the sole purpose of the latter's complying with their duty of due diligence under the 2004 Law, including information on the assets of the fiduciary contract / trust held or managed in the context of the entry into a business relationship.

Greater responsibility

Any person having access to the Trust Register has to notify the AED of any discrepancies between the information about UBOs available in the Trust Register and the information about UBOs at his /her/its disposal.

Until the relevant information is updated, a specific entry shall be made in the Trust Register and the persons to whom access to such information is granted will be informed that an update of the information has been requested.

What should you do?

Fiduciaries and trustee shall make sure that the information they have about the UBOs of the fiduciary contracts / trusts remains up-to-date and accurate at any time and duly and timely update the Trust Register in this respect.

With respect to the UBOs, it needs to be assessed carefully if the disclosure of the UBOs' information would be a major threat to their personal security. If this were the case, a request to restrict the access to the information shall be prepared promptly.

How can we help you?

We are happy to assist you with any queries you may have around the Trust Register Law and the compliance with it, including e.g. whether the Trust Register Law is applicable to you, on the determination of who are the UBOs of your fiduciary contract / trust, on what information relating to the fiduciary contract / trust and their UBOs needs to be filed.

 

Authored by Emmanuel Lamaud and Geraldine Felber.

 

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