Detention money laundering, a Luxembourg specificity.

The Luxembourg penal code has a specific feature that is absent from French law and many other European laws. In fact, article 506-1 point 3) of the Luxembourg penal code provides for self-blanching and detention. It reads as follows: “those who have acquired, held or used property as referred to in Article 31(2)(1), which is the object of or proceeds, directly or indirectly, from the offences listed in point (1) of that Article or which constitutes any pecuniary advantage derived from one or more of those offences, knowing, at the time they received it, that it was derived from one or more of the offences referred to in point (1) or from participation in one or more of those offences.

In clearer terms, Luxembourg punishes the mere possession of the proceeds of an offence. Thus, anyone who commits an offence covered by Article 506-1 point 1), and which may constitute a primary money laundering offence, is in fact committing a self-laundering offence in possession of the proceeds of his offence. In addition, numerous applications of these provisions have been made, underlining the fact that the article applies to almost every offence covered by article 506-1. To illustrate the application of this article, let’s look at case law. Let’s take as a telling example the decision of the tribunal d’arrondissement du Luxembourg in its judgment 1922/2020 of July 30, 2020. In this case, a man commits a simple bike theft, and uses the bike. On the basis of this principle, the court ruled that the offender had committed money laundering, which was applicable in this case, since he was in possession of the bike he had just stolen. The man was convicted of theft and money laundering. Note therefore the very extensive application of article 506-1 point 3), which in this case borders on the absurd.

This article is currently being debated in the Luxembourg parliament, with a view to amending it to include the possibility of prosecuting money laundering in Luxembourg even when the primary offence used to obtain the funds is committed in another country which does not punish such an offence. This amendment also raises the issue of self-laundering – detention in connection with self-laundering. In fact, the amendment aims to limit the penalties for self-laundering – detention, by stipulating that in this case the penalty cannot exceed that for the primary offence. This was not previously the case, and could lead to a real increase in penalties simply by retaining the offence of self-blanching. In any case, these modifications do not aim to abandon the conviction, nor the principle of self-blanching-detention. However, this amendment contradicts article 5-1 of the French Penal Code, which stipulates that in the event of multiple offences, the higher penalty is to be applied, thus creating a contradiction in the internal order. The legislator has thus contradicted a fundamental principle, in a bid to limit the excesses that can result from self-blanching and detention, by imposing heavy penalties for offences that could be minor. This is not the only legal problem with self-blanching.

In fact, this article raises a fundamental legal problem, which has been raised by the Luxembourg Bar Association, which was consulted by Parliament. He applauds the fact that the artificial inflation of sentences has been halted by the introduction of a limitation to the sentence imposed for the primary offence. However, the very existence of self-blanching under Luxembourg law is open to question.

Here, we need to look at the basis of this offence, and its relevance, or even validity, in terms of the Luxembourg constitution.

Initially, the existence of this offence was more a political than a legal decision. In fact, there is no obligation to do so under European law, and few European countries penalize it. In an earlier opinion, the Conseil d’Etat cited compliance with the FATF recommendations. However, the recommendation invoked by the Council is No. 3, which is limited by the interpretative notes invoked by the same Conseil d’Etat: “[c]ountries may provide that the offence of money laundering does not apply to persons who have committed the underlying offence, where this is contrary to the fundamental principles of their domestic law”.

However, it is worth pointing out the problems associated with a judge using the term “self-blanching-detention” in domestic law, and even in matters of Union law.

Initially, the problems raised in domestic law arise from a comparison with concealment under article 505 of the French Penal Code, which consists of the possession or possession of an object obtained with the aid of a crime or misdemeanour. This is in fact the same definition as the offence of self-blanching-detention set out in article 506-1 point 3) defined above. However, the person who commits the offence can never be prosecuted for concealment, since the person who holds the proceeds of the offence is the one who committed it. Despite the perfect identity, the penalties will be different whether the individual is prosecuted for self-blanching or handling stolen goods. Two individuals who have committed the same act from a material and intellectual point of view will be treated differently. This contradicts article 10 bis of the Luxembourg constitution, which stipulates equality before the law.

Moreover, these contradictions and problems in domestic law also arise in European Union law and with regard to the principle of non bis in idem. Indeed, in the case of self-money laundering, it’s the same intention that drives the criminal: he commits an offence with the aim of making a profit. So there’s only one behavior: he doesn’t do anything to launder this money. There is therefore an ideal contest, and a conflict of qualification, but there are no multiple offences. And under European Union law, Luxembourg’s current position may be questioned in the light of Article 4 of Protocol No. 7 to the European Convention on Human Rights, which states that “a single act, otherwise qualified, shall not give rise to a double conviction”. However, in this case, tax evasion that enables a profit to be made that could also be described as self-laundering is indeed the same behaviour. In a decision handed down in December 2016, the French Supreme Court overturned a ruling that had convicted an accused person of misuse of corporate assets and money laundering, without taking into account the facts constituting money laundering as distinct from the payments constituting misuse of corporate assets, for breach of the ne bis in idem principle. In fact, it is contrary to justice and its fundamental principles to condemn one and the same reprehensible behaviour for two offences.

In terms of European Union law, domestic law and fundamental principles of law, the position of the legislator and the Conseil d’Etat, under the guise of following the FATF recommendations to the letter, which are not binding, gives rise to real problems. These have been taken into account in the forthcoming amendment, which nonetheless still seems inadequate in view of the contradictions created by maintaining this offence.