Newsflash – Circular CSSF-CPDI 23/35

On 18 October 2016, the Commission de Surveillance du Secteur Financier (the "CSSF") published the Circular CSSF-CPDI 16/02 (as amended, the "Original Circular") on the scope of the deposit guarantee and the investor compensation, with the aim of clarifying certain eligibility criteria with respect to the deposit guarantee and the investor compensation.

Last week, on 23 May 2023, the CSSF published Circular CSSF-CPDI 23/35 (the "Updating Circular") amending the Original Circular in order to incorporate the provisions of Article 62 of EU Regulation  2019/2033, which impact the definition of financial institutions and their exclusion from the scope of deposit guarantee and investor compensation. Additionally, the Updating Circular clarifies certain criteria related to the identification and indemnification of accounts where the account holder differs from the person absolutely entitled, in the context of the application of Articles 174 and 196(5) of the Law of 18 December 2015 on the failure of credit institutions and certain investment firms (the "Law of 2015").

The main points that are clarified by the Updating Circular are the following:

• Repayment allocated to the Luxembourg Deposit Guarantee Fund (in French, the "FGDL"): in case of failure of members of the FGDL, other than credit institutions, any credit balance which results from temporary situations deriving from normal banking transactions and which a credit institution, member of the FGDL, is required to repay under the applicable legal and contractual conditions, shall be allocated to the FGDL;
• Accounts whose holders are not absolutely entitled: it has been clarified that articles 174 and 196(5) of the Law of 2015 also apply to professionals assimilated to investment firms such as UCITS management companies or alternative investment fund managers whose authorisation includes the management of portfolios on a discretionary, client-by-client basis;
• Increase of the AML/CFL requirements: regarding omnibus accounts (as defined in the Updated Circular), persons absolutely entitled to the sums in omnibus accounts shall be considered as beneficial owners within the meaning of the Law of 12 November 2004 on the fight against money laundering and terrorist financing and shall be identified accordingly; and
• Identification of the account holder: when the account holder is not the person absolutely entitled to the funds or instruments deposited, the FGDL and the Luxembourg Investor Compensation Scheme (Système d'indemnisation des investisseurs Luxembourg) members shall take reasonable measures to regularly obtain information on the number of identifiable and eligible persons entitled to the sums in the account as well as on the amounts to which each of them is entitled, and supporting documents may be requested by the Council for the Protection of Depositors and Investors of the CSSF. In addition, it is no longer sufficient for a depositor acting for third parties to simply communicate the number of beneficial owners of an account to the bank, but they now have to be identified at the moment of default for the deposits to be covered by the FDGL.

All these updates are relevant and are addressed to all credit institutions and investment firms incorporated under Luxembourg law, to the "POST Luxembourg", to the branches of non-EU credit institutions and investment firms, as well as to UCITS management companies and to alternative investment fund managers whose authorisation includes the management of portfolios on a discretionary, client-by-client basis.

For more information, please contact our Luxembourg team.