Article Post on 15 September 2020

A Law Creating a Register for Trusts and Fiduciary Contracts

_On 13 July 2020, the law transposing article 31 of the directive (EU) 2015/849 (the ’Fourth AML Directive’) and creating a register for trusts and fiduciary contracts (the ‘Law’) was published in the Luxembourg official Gazette. The Law, dated as of 10 July 2020, creates new obligations for certain entities and should therefore be closely monitored.

The purpose of the Law is to transpose the entirety of article 31 of the Fourth AML Directive. Such article had already been partially transposed by way of a law of 10 August 2018 relating to the information to be obtained and kept by the trustees. For the sake of clarity, the Law abrogates such law of 10 August 2018.

The Law has two main purposes: (i) the reinforcement of the obligations concerning the information which must be obtained and kept at the place of administration of the express trust or of the trust, by the trustees on the beneficial owners of any express trust administered in Luxembourg and (ii) the creation of a register for trusts, fiduciary contracts and other legal structures which have a structure or functions similar to those of trusts and fiduciary contracts (this is the case when such legal structure allows a person to create legal relationships that place property under the control of a third party in the interest of a beneficiary or for a specific purpose and when it has the following characteristics: 1) the goods placed under the control of the third party constitute a distinct mass and do not form part of the patrimony of the third party, 2) the title relating to the goods placed under the control of the third party is established in the name of the third party or of another person on behalf of the third party, 3) the third party is vested with power and charged with the obligation, for which he is held accountable, to administer, manage or dispose of the goods placed under his control according to the terms of the legal structure and to the particular rules imposed on the third party by the law) (the ‘Register’).

The Law refers to the definitions of the trust as provided by the Hague Convention of 1 July 1985 but also introduces a definition of the so-called trust exprès, being a trust clearly established by the constituent by way of a deed (in opposition to trusts resulting from the law, such as constructive trusts). Such definitions are in line with FATF recommendations.

For the definition of fiduciary contract, it should be noted that the Law refers to the definition provided by the amended law of 27 July 2003 on trusts and fiduciary contracts, pursuant to which ‘a fiduciary contract (…) is a contract by which a person, the ‘fiduciant’, agrees with another person, the ‘fiduciaire’, that the latter, under the obligations determined by the parties, becomes the owner of property forming a fiduciary patrimony’, whereby the ‘fiduciaire’ under the meaning of this law can only be a credit institution (bank), an investment firm, an investment company with variable or fixed capital, a securitisation company, a mutual fund or securitisation fund management company, a pension fund, an insurance or reinsurance or a national or international public body operating in the financial sector.

Obligations Regarding the Information to be Kept by the Fiduciary Contract and the Trust

The Law provides that trustees and fiduciaries should obtain and keep information regarding the fiduciary contract or the trust at the place of administration of such fiduciary contract or trust. This information relates to the identity of the following:

  • The constituent party(ies),
  • The trustee(s) or fiduciary(ies),
  • The protector(s) (if applicable),
  • The beneficiary(ies) or the category of the beneficiary(ies),
  • All other natural persons having effective control of the fiduciary contract or the trust.

This information should be exact and up-to-date and be updated within a reasonable period of time if any change occurs.

The Law also provides that the trustees of trust exprès managed in Luxembourg and fiduciaries are obliged to obtain and keep elementary information concerning other professionals and entities governed by foreign law which, if their head office was located in the Grand Duchy of Luxembourg, would be considered as professionals, who provide services to the trust or the fiduciary contract or which enter into a business relationship with the trust or the fiduciary contract. This information should also be exact and up-to-date and be updated within a reasonable period of time if any change occurs. After an opinion of the Luxembourg Council of State, elementary information has been defined in the Law as information allowing identification of (i) in the case of a natural person: name and first name, nationality, country of residence and address or (ii) in the case of a legal person: company name, registered office and registration number.

If the trustee or the fiduciary fails to comply with the obligations regarding the information to be kept, the control authorities (either the registration tax and VAT administration (Administration de l’Enregistrement et des Domaines) (the ‘AED’), the CSSF (Commission de Surveillance du Secteur Financier) or the CAA (Commissariat aux Assurances), as the case may be) can impose sanctions to the trustee, the fiduciary and to the members of its management body or any person responsible for the infringement. The sanctions may be the following:

  • A warning,
  • A public declaration indicating the identity of the natural or legal person and the nature of the infringement,
  • An administrative fine in a maximum amount of twice the amount of the advantage resulting from the infringement (when it is possible to determine such amount) or in a maximum amount of EUR 1,250,000.

The Register

The Law provides that all fiduciary contracts and trust exprès having a trustee or fiduciary established or residing in Luxembourg should be registered with the Register, which is monitored by the AED. The AED will provide a registration number to each registered fiduciary contract and trust.

The registration with the Register includes:

  • The registration number,
  • The name of the trust or fiduciary contract,
  • The date of establishment of the trust or fiduciary contract,
  • Whether the trust or express trust holds or has a controlling interest in a company or other legal entity (other than the companies and legal entities already having the obligation to declare their beneficial owner(s) with the register of beneficial owners), and
  • For each beneficial owner:
    • in the case of a natural person:
      • name and first name,
      • nationality,
      • date of birth,
      • private or professional address,
      • identification number, and
      • nature of involvement in the fiduciary contract or the trust and scope of interests held in the fiduciary contract or the trust.
    • in the case of a legal person:
      • corporate name,
      • registered office,
      • registration number (and name of the register, if it is registered with a foreign register), and
      • nature of involvement in the fiduciary contract or the trust and scope of interests held in the fiduciary contract or the trust.

The AED may order the trustees and fiduciaries to register or update the information indicated above. In case of such order, the AED can impose a daily penalty of up to EUR 1,250 (with a total maximum amount of EUR 25,000).

Moreover, if the trustee or the fiduciary fails to comply with the obligations regarding the Register, the AED may impose sanctions to the trustee, the fiduciary and to the members of its management body or any person responsible for the infringement. The sanctions can be a:

  • Warning,
  • Public declaration indicating the identity of the natural or legal person and the nature of the infringement,
  • Administrative fine in a maximum amount of twice the amount of the advantage resulting from the infringement (when it is possible to determine such amount) or in a maximum amount of EUR 1,250,000.

According to article 23 of the Law, the AED takes into account the following to determine the appropriate sanction:

  • Seriousness and duration of the infringement,
  • Degree of responsibility of the natural or legal person held responsible for the infringement,
  • Financial situation of the natural or legal person held responsible,
  • Advantage derived from the violation by the natural or legal person held responsible, as far as this can be determined,
  • Damage suffered by third parties as a result of the violation, insofar as it can be determined,
  • The degree of cooperation of the natural or legal person held responsible for the breach with the AED,
  • Previous infringements by the same person held responsible.

It is possible to introduce, within a one-month period, an appeal before the administrative court against the decisions of the AED.

Registration and information are kept by the Register for five years after:

  • The end of the trust or express trust,
  • The termination of the involvement of the person concerned in the trust or fiduciary contract.

Regulation bodies may access the information provided in the Register for AML purposes. Furthermore access to the information of the Register may be granted by the Director of the AED to any person showing a legitimate interest thereto for AML purposes. The request therefore must indicate the identity details of the applicant, and for the trust or fiduciary contract, its registration number or its name or its date of establishment together with the name of the trustee. The request must also provide the reasons of such request, as well as the purpose for which the request is done. In case the information is used for purposes other than the ones indicated in the request, a fine of up to EUR 1,250,000 can be applicable.

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