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eArchiving

Companies are bound to keep certain documents and information available to face legal obligations.

Paper documents storage costs and availability issues are growing.

Legal framework (ecommerce act of August 14, 2000, Code of Commerce, Civil Code, RGD December 22, 1986, tax rules, specific sectors rules) exists but a reform is under review with regards to technical and organizational requirements and could go under scrutinity in 2013.

Family offices

The Grand-Duchy, aside its prosperous private banking activities, has experienced a growing interest for Family Office business in order to meet high wealthy families’ needs that become more and more complex and varied when it comes to wealth management and advisory.

A bill in Luxembourg, regulating the activity of Family Office, was released in December 2012 and lead to the creation to the creation of Article 28-6 of the April, 5 1193 Law, as amended, relating to Family Office activity.

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ISAE 3402 / SSAE 16 (replaces SAS 70)

Outsourcing is a growing trend and companies increasingly depend on third-party PSF providers to deliver critical services. Companies often depend on many providers to deliver a wide range of services such as:

• Information technology
• Accounting and Finance
• Customer care
• Human resource and benefits management
• Payment and administration
• Custody
• Fund administration
• Transfer agency

Companies outsourcing services to a PSF are more than ever looking for independent assurance that their service providers’ operations and internal control environment are sound and operating effectively. Hence, they are increasingly requesting Service Organization Control Reports when chosing the PSF that will serve them.

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FATCA (Foreign Account Tax Compliance Act)

The US Treasury Department and IRS recently released nearly 400 pages of proposed regulations that detail their plans to implement the Foreign Account Tax Compliance Act (FATCA), which becomes effective on 1 January 2013.

The proposed rules are intended to prevent US taxpayers who hold financial assets in non-US financial institutions and other offshore accounts from avoiding their tax payment obligations. US government is then asking all FFI (Foreign Financial Institutions) to identify and transfer information on US investors identity and assets to US IRS. As FFI" includes not only formal banks, but also investment funds, insurance companies, and some non-regulated investment firm. ThoughtWith FATCA, US government is having a system of punitive withholding tax (30%) applicable to non-participating FFI and recalcitrant investors.

An FFI participant must not only perform reporting in the U.S. referencing "U.S. persons" but will also potentially apply the 30% withholding taxes for certain payments to non-Participating FFI and recalcitrant (ie accounts not sufficiently identified to determine the status “U.S. persons” or “non-US persons”).

On February 8, 2012, the IRS and the U. S. Treasury Department issued a regulation that determines the interpretations of the IRS regarding the obligations of identification, reporting and withholding.

Taking into consideration the huge efforts required by the FATCA implementation, and the costs associated with it, the concerned PSF must prepare as soon as possible in order to be able to sign an agreement with the IRS no later than December 31, 2013 which will apply from 1 July 2014.

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Professional depository of assets other than Financial Instruments: Introduction of a new PSF category?

The AIFMD (Alternative Investment Fund Managers Directive) gives the option to Member States to allow the depositary of certain Alternative Investment Funds to be a professional entity which does not necessarily qualify as a bank or an investment firm.  According to the recently published Bill relating to the AIFM Act, Luxembourg intends to exercise this option by introducing in the Financial Sector Act a new category of specialised PSF named “professional depositary of assets other than financial instruments”.

Wealth management

Wealth management industry is facing dramatic changes which impact is business model: regulatory pressures, growing transparency and market competition are reshaping this industry.

In the same time, private clients (High Net Worth Individuals) have to deal with a more complex tax landscape and are seeking professionals which are able to deal with international corporate and personal tax issues.

As former international tax lawyers and wealth managers, we are in position to offer comprehensive and tailor-made solutions to institutional clients and HNWI.

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CSSF circular 12/552 on Central administration, Internal

Applicable to banks and investment firms, the objective of the new circular is to centralise in one single document all the main requirements related to governance matters, thereby efficiently transposition rules promulgated by European authorities, notably by the European Banking Authority.

While taking into account the principe of proportionality, the Luxembourg regulator has adopted very precise rules regarding the respective role and responsabilities of the governing and management bodies ( ie Board of Directors and Autorized Management) and has recognized in its regulatory framework “the three-line.of defence” concept that clearly position the compliance, risk contrôle and internal audit fonction in the organization.

Even if several requirements of circular 12/552 were alrealdy demanded by prevailing regulation, the text also includes new elements, such as the “ fit and proper”conditions for the member of the management body, the strengthened role of the risk Control fonction or the existence of designated information security and IT officers.

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