How to hide dirty money
Luxembourg is one of Europe‘s top destinations for those looking to hide dirty money. Travelling on a budget of several million with questionable origins? Try Luxembourg, where anti-money laundering policies still seem stuck in pilot phase.
In the latest case, UK police presented evidence linking accounts at Luxembourg's BIL bank to a $500 million embezzlement scandal that led to the imprisonment of Jahangir Hajiyev, former chairman of the International Bank of Azerbaijan. Stolen Azerbaijani funds were reportedly invested in Luxembourg real estate, it was revealed. BIL bank appears to provide a welcoming environment for dubious transactions. In 2020, it was fined €4.6 million for non-compliance with anti-money laundering regulations.
Meanwhile, two other local banks are under investigation in a separate embezzlement scandal. A employee of Caritas Luxembourg managed to embezzle €61 million by taking out loans in the name of the charity and transferring the money to accounts abroad. Caritas Luxembourg collapsed and forced the government to step in and maintain the charity's services. The recent Caritas scandal has triggered a thorough investigation into the negligent system in Luxembourg that enabled the embezzlement. New procedures are expected to be introduced.
Ironically, it took a local case costing real local money to push authorities into action. For decades, Luxembourg failed to take the mounting risks of its growing financial hub seriously, even in the face of large-scale international scandals such as Luxleaks and Openlux.
In 2010, the International Financial Action Task Force (FATF) threatened to put Luxembourg on its grey list of countries with strategic deficiencies in anti-money laundering regulations – alongside countries such as Burkina Faso, the Philippines and Croatia. Only after this warning did the government introduce policies to curb money laundering and to comply with international regulations. While the FATF's most recent report acknowledged Luxembourg's progress, it also highlights a lack of prosecutions and insufficient recovery of assets linked to money laundering.