Luxembourg reinforces asset recovery and confiscation regime for criminal matters

Growing significance of asset seizure and confiscation

Seizure (freezing, saisie) and confiscation measures are increasingly important tools in the fight against financial and economic crime. Their main purpose is to ensure that “crime does not pay” by removing illegally acquired assets from the market and depriving offenders of their profits. The legal regime governing seizures and confiscations has been expanded repeatedly over time, while investigative methods have been strengthened to target not just the criminal acts themselves (identifying the circumstances, perpetrators and accomplices), but also the economic benefits they have produced for the purposes of confiscation or return to the victim(s).

Need to reform EU and domestic law

As soon as the previous reform came into force — the law of 22 June 2022 on the management and recovery of seized and confiscated assets (2022 Law) — further tightening of the legislation was already underway, reflecting the authorities’ determination to adapt their legal arsenal to constantly evolving criminal practices. In fact, Directive (EU) 2024/1260 (Directive) was adopted because the previous one did not fully achieve its objectives.

Focus on organised crime

The Directive is primarily aimed at tackling organised crime, acknowledging that criminal organisations are fundamentally profit-driven, and notes that these organisations often reinvest their proceeds and use legal entities as intermediaries for these purposes. The Directive’s objectives are to facilitate the recovery and confiscation of criminal assets and to ensure the effectiveness of seizure and confiscation measures. It places a strong emphasis on cooperation, not only among domestic authorities but especially at cross-border level between authorities of different Member States. Cooperation must occur swiftly, given the speed at which criminals transfer assets between countries.

The Directive also expands the grounds for seizing and confiscating illegally acquired property held by third parties, in recognition that it is common practice for suspects or accused persons to transfer assets to others to shield them from seizure and confiscation. The Directive takes into account the position of victims in criminal proceedings and their legitimate interest in obtaining compensation.

Timing

In principle, the Directive must be implemented by 23 November 2026. However, it is worth noting that the previous Directive (2014/42/EU) was scheduled to be implemented by October 2016 but was only implemented in June 2022 – almost six years late. This area is both complex and delicate, as it touches upon fundamental freedoms, including property rights. The scope of seizures and confiscations has gradually expanded and can affect legally acquired assets, which are placed under judicial control, and can even target third parties who did not participate in the offence. A seizure can have a major impact on individuals and affected businesses, especially given the duration of complex cross-border criminal proceedings.

Domestic reforms

The implementing legislation, bill of law 8698 (Bill), goes beyond what is strictly required by the Directive – which is not necessarily “gold-plating” in this instance. Firstly, all criminal offences will be covered: it would make little sense to have different confiscation rules solely for offences harmonised at the European level. Furthermore, the Luxembourg government has taken the opportunity to introduce a number of improvements and clarifications not included in the Directive.

In particular, the Bill seeks to unify terminology between national law, European law and other relevant texts to ensure greater consistency across legal frameworks. It adopts the extensive European definitions of “proceeds (of crime)” (produit), “property” (“bien” replacing “objet”) and “instrumentalities” (instrument), thereby providing greater clarity regarding potential objects for seizure or confiscation.

Key amendments

Expanded confiscation toolbox

Luxembourg’s confiscation powers are broadened significantly with four key new mechanisms in addition to “value confiscation” (confiscation par équivalent), which was introduced by the 2022 Law. Value confiscation means that if the object or proceeds of the crime, or substituted assets, cannot be brought under judicial control, it is possible to seize an equivalent value from the lawfully acquired assets of the accused individual.

Extended confiscation

The Directive requires an option for extended confiscation where convicted persons cannot prove the lawful origin of their assets. The Bill permits confiscation of assets where the court considers, based on the circumstances of the case, that the assets were derived directly or indirectly from criminal activity. This measure applies only to serious offences (i.e. punishable by maximum imprisonment of at least four years).

There is a rebuttable presumption of illicit origin where there is a disproportion between the defendant’s lawful income and their actual possessions and economic resources. Once the prosecution proves this disproportion, the burden shifts to the defendant to prove the lawful origin of the assets to avoid confiscation. Whilst disproportion is an important factor, the courts may consider other criteria to establish the link between criminal behaviour and the assets subject to extended confiscation, such as the nature of the offence and the modus operandi.

Third-party confiscation

The Directive extends the ability to confiscate criminal assets (or assets of equivalent value) transferred to a third party where the third party knew or should have known the transfer/acquisition was intended to avoid confiscation. The Bill allows confiscation (subject to good faith third-party rights) where the third party “knew or should have known” the purpose was to evade confiscation, with indicia such as transfer free of charge or at a clear undervalue and transfer to closely related persons.

Non-conviction-based confiscation

The Directive provides for confiscation where criminal proceedings were initiated but cannot continue due to circumstances such as illness, escape, death or limitation periods, provided the court is satisfied that the proceedings could otherwise have led to a conviction (at least for offences capable of generating significant economic gain) and that the assets can be presumed to derive from or be linked to the offence.

This is a nuanced approach. There will now be public trials without an accused, focused solely on confiscation, but confiscation can be considered a penalty (or at the very least, it presents the characteristics thereof and is experienced as such).

“Unexplained wealth” confiscation

This is one of the most significant innovations in the Bill. The Directive introduces the ability to confiscate “unexplained wealth” in relation to serious criminality generating significant economic gain.

Luxembourg is adopting a broad approach and is not restricting this route solely to organised crime, as permitted by the Directive.

However, this type of confiscation is only possible for assets identified during an investigation/inquiry (instruction/enquête) when other confiscation measures cannot be applied for legal or factual reasons. The assets must derive from a serious offence (punishable by a maximum of at least four years’ imprisonment) and the offence must be capable of generating significant economic gain. Factors include disproportion to lawful income, absence of plausible licit source and connection to persons linked to a criminal organisation.

The existing Luxembourg offence of “enrichissement illicite” is retained alongside this new “fortune inexpliquée” confiscation mechanism. Since 2018, Article 324quater of the Criminal Code has imposed fines and imprisonment on individuals who are unable to prove the sources of their wealth or the origin of assets in their possession. This applies notably when the person maintains regular contact with one or more individuals either engaged in certain criminal activities and thereby providing them with direct or indirect financial benefit, or with victims of such offences. There has not yet been any conviction on this basis.

Thus, this legislation adds to the routes available to the authorities to seize assets without needing to establish full proof of the commission of an offence and/or the link between the wealth and an offence. Prosecutors may rely on Article 324quater; they may also prosecute individuals for concealment (recel) or money laundering because the latter are in possession of assets whose origin cannot be lawful, or they may take action under the new confiscation rules.

Institutional reform: creation of BGRA

The Bureau de recouvrement des avoirs (BRA), currently attached to the Prosecutor’s Office in Luxembourg, and the Bureau de gestion des avoirs (BGA) will be merged into a single unit: the “Bureau de gestion et de recouvrement des avoirs” (BGRA).

The idea of a single entity is not new. It was initially proposed in 2017, but, following strong criticism, the 2022 Law created two separate entities. We are thus reverting to the original idea, but this time with an entity that is entirely under the authority of the Minister of Justice — the BGRA will leave the judicial sphere and become an administrative entity.

As a result, investigations conducted by the BGRA will be administrative in nature, yet they remain integrated into judicial criminal proceedings, which may complicate interactions.

The BGRA is structured as two departments: the BGA for asset management and the BRA for asset recovery and tracing.

The BGRA will manage all seized assets, regardless of whether they are subject to confiscation or serve as evidence. In the past, making this distinction has proven difficult in practice.

Modernised asset management regime

Early sale, destruction and substitution

Under new Article 580 of the Code of Criminal Procedure, the BGRA may dispose of perishable or rapidly depreciating assets before a final confiscation decision is made, where storage/maintenance costs are disproportionate, or where management requires hard-to-source expertise. Where the assets concerned are tangible and may constitute evidence, the BGRA must notify its intention to sell and allow affected persons (prosecutor, Director of Customs/Excise Administration, the courts, etc.) to submit observations and request to be heard before a “vente anticipée” (interlocutory sale) decision is made.

The BGRA can make this decision on its own initiative; a disposal decision by the public prosecutor or the investigating judge is no longer required. An application for disposal may also be submitted by interested parties.

The BGRA is also empowered to destroy certain seized assets (dangerous/noxious, illicit to hold or not capable of being valued), and the destruction costs of dangerous, noxious or illicit assets are charged to the convicted or civilly liable person. The BGRA may also return a seized asset in return for payment of a sum of money (substitution), so the seizure shifts to the substituted sum.

In all cases, the sum of money replaces the asset for the purposes of seizure or confiscation.

Cryptoassets

The existing rules relating to cryptoassets will be enhanced: seized cryptoassets will continue to be transferred to a wallet managed by the BGRA, which preserves, sells or returns these assets under the same early disposal or substitution mechanism previously applied.

Mandatory asset tracing

Where an offence is likely to result in significant economic gain, the public prosecutor or investigating judge must order the tracing and identification of the proceeds, instruments and all assets liable to confiscation. This investigation is entrusted to the BGRA (and will therefore be of an administrative nature), which will consult the various registers to which it has access, may cooperate with its foreign counterparts and may question certain professionals (such as financial institutions and chartered accountants).

These investigations need to be distinguished from asset investigations conducted by judicial authorities, as the latter have other coercive means available to detect assets that can be seized.

Enhanced information access for asset tracing

Asset recovery capabilities are increased by granting the BGRA extended access to information necessary to establish the existence, ownership or control of assets potentially subject to freezing/confiscation, with data protection safeguards and the possibility (for certain categories such as tax/social security/law enforcement data) to provide indirect access following a reasoned request.

The Bill grants the BGRA access to a wide range of public registers and files, including corporate registers (RCS/RESA/RBE), the Register of Trusts and Fiduciary Contracts, the National Registry of Natural Persons (RNPP), the CCSS social security affiliations file (excluding health data), land and cadastral registers, vehicle/aviation/maritime registers, the central account/IBAN search system held by the CSSF, tax data held by the ACD and AED, the BGRA’s own seized/confiscated assets register and multiple EU systems (VIS/SIS II/EES/ETIAS/ECRIS-TCN), plus customs cash-control information held by the customs administration.

Access extends to customs data, cryptoasset transfers and specified EU information systems. The Bill provides for immediate/direct remote access where possible, logging/access controls and case-by-case necessity/proportionality limits. Otherwise, the BGRA can request the information from the relevant authority.

Information sharing with tax administrations

The Bill creates an express legal framework enabling information exchange between the BGRA and the tax authorities, including the ability to notify the tax authorities before the BGRA returns sums to a person in order to enable the tax authorities to assert any claims they may have.

Enhanced protection

Although third-party assets may be confiscated (see above), the Bill nevertheless provides protection for the interests of third parties. It also seeks to take account of the interests of third parties whose assets have been seized and who have rights over those assets, notably by way of any kind of security interest, or who have initiated civil seizures. This aspect will be of particular interest to financial institutions, and we will cover this topic in a separate newsflash.

The Bill also provides for greater transparency. The requirement to provide reasons for seizure decisions has been strengthened. In addition, the seizure report must be notified to the affected persons: the persons against whom the freezing order is issued, persons owning the property and persons who have an interest in the seized property or who are affected by the measure.

Seizure of assets to secure compensation claim

The Bill permits the seizure and confiscation of assets on the ground that they may serve to secure compensation claims for harm caused by an offence. However, the scope of this provision remains unclear. Is it now possible for authorities to confiscate legitimately acquired assets solely for the purpose of compensating a victim? For example, if a driver is involved in a road traffic accident, could their bank account be seized to secure reimbursement to the victim for material and bodily harm?

This is merely one question among several that the Bill leaves open. The parliamentary process and practical implementation may provide clarification.