A Justice Ministry report published in February highlighted the increased risk of using trusts and other legal arrangements to conceal the identification of beneficial owners. (Photo: Shutterstock)

A Justice Ministry report published in February highlighted the increased risk of using trusts and other legal arrangements to conceal the identification of beneficial owners. (Photo: Shutterstock)

Finance minister Yuriko Backes says that the latest EU sanctions package against Russia provides a framework for trust domiciliation services, adding that there is “no indication” these firms are used to circumvent the restrictive measures.

Backes (DP) was responding to a parliamentary question by MP Natalie Oberweis (déi Lénk) who had enquired about the risk of trusts and company services providers (TCSPs) being used to bypass the sanctions against Russia, for example, by targeted individuals relocating their assets in the short term, placing them in shell companies or trusts.

“There is currently no indication that sanctions are being circumvented in Luxembourg,” Backes said in a document published on Monday.

The role of trust services in aggressive arrangements to evade sanctions had been raised during a meeting of European ministers (Ecofin), Oberweis claimed.

Concealing beneficial owners

A  in February concluded that trusts constitute “a very high inherent and residual risk in terms of money laundering and terrorist financing”.

The report highlighted the possibility, in the context of legal structures, of using nominee contracts in both the shareholding and control structure. This method makes it possible to conceal the real identity of the beneficiaries or to complicate the process of identifying them.

Registrations of legal constructions in Luxembourg have grown significantly between the third quarter of 2020 and the end of 2021, the report said further.

In her answer to the parliamentary question, Backes said that all company and trust service providers are obliged to apply the international sanctions, in accordance with the law on the implementation of restrictive measures in financial matters. This law provides the supervisory authorities with the tools to ensure compliance with the sanctions and to act in case of non-compliance, she said.

Domiciliation of trusts

The finance minister also stressed the importance of the “intensive exchange with all the authorities concerned” in the framework of the sanctions monitoring committee, which has been meeting regularly.

When asked about the discussions at European level on a possible tightening of trust services, Backes said that this aspect was included in the against Russia, adopted on 8 April.

“This text prohibits, among other things, the provision of domiciliary services for trusts and similar structures with Russian beneficiaries and follows the Dutch initiative on a legal reinforcement of TCSPs,” she said, adding that this decision was supported by Luxembourg.

This story was first published in French on . It has been translated and edited for Delano.

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