Luxembourg as a prime location for Family Offices
Luxembourg is currently one of the safest and most stable financial centres in the world. Legal certainty, tax benefits, the presence of a variety of financial institutions and a mature private banking industry are the main criteria for wealthy clients when deciding where to place their investments. In the case of Luxembourg, these criteria have long helped to attract foreign investment and will have an even more significant influence in the future.
In Luxembourg, Family Offices offer a variety of services ranging from non-financial services including data management, accounting, banking and finance, to more personal services including coaching, philanthropy and mediation. In this area, the industry relies on a well-established network of experienced service providers.
The Law – Bringing light into the dark
The Family Office Act regulating family office activities in Luxembourg came into effect on 21 December 2012.
This has made Luxembourg one of the first countries in the world to have a specific regulatory framework tailored to the activities of Family Offices. While the law does not provide a clear definition of the Family Office itself, it does provide an explicit description of the activities to be performed/not performed in the context of the activity of a Family office. Its most important innovation is the creation of a new Professional of the Financial Sector (PSF) – Family Office status.
This dedicated PSF status requires all professionals not already automatically authorised as regulated professionals in view of their services to register with the CSSF. It also requires them to be henceforth supervised by the regulatory authority and to comply with a number of professional obligations (such as AML, professional secrecy, etc.).
By adhering to these requirements for Family Offices, substantial value added can be created for Family Office clients by offering them professional and trustworthy services.
The Law in a nutshell:
The Family Office law came into effect on 21 December 2012, creating a specific and coordinated legal framework for Family Office activity. It is one of first of its kind worldwide
To strengthen the financial sector in Luxembourg, to protect its position and to improve transparency
Provides a business-like description of Family Office services – serves as an industry benchmark
Dedicated to Family Office solution service providers; requires registration with the CSSF, the applicant must be of a corporate nature with minimum share capital of €50,000.
Provides transparency via legal and business requirements – regulated professionals are bound by AML, financing of terrorism and professional secrecy obligations as well as the transparency of fees and remuneration
- The law introduces a penalty of up to five years in prison and/or a fine of €125,000
- The law provides for a grandfathering period of six months to allow existing Family Offices to acquire new licences
Single Family Offices, Board members of commercial companies or foundations, trustees, fiduciaries, or judicially appointed mandates as well as custody and investment activities