Suspicious money from around the world flowed into secret shell companies based in Luxembourg. Russian money also circulates there and then returns to Russia, as revealed by OCCRP in 2021. Due to the violation of Ukraine’s territorial integrity, the European Union has imposed 11 sets of sanctions on Russia by June 23, 2023. Polish entrepreneurs also face penalties of up to 20 million PLN or even up to 15 years of imprisonment for breaking these sanctions. How to check a company from Luxembourg without risking sanctions?
Exercising due diligence in verifying the contractor:
Establishing a company is relatively easy nowadays, often achievable online without leaving home. Therefore, certainty about who truly operates under a created name and entry in the registry is elusive until verified. Verification involves widely accepted measures in business intelligence, primarily verifying the credibility and current status of the contractor’s documentation: National Court Register (KRS), Tax Identification Number (NIP), National Business Registry Number (REGON), permits, and certificates necessary for specific business operations.
Verification can be pursued by obtaining information from relevant entities and institutions such as registry courts, Social Insurance Institution (ZUS), tax offices, national and international chambers of commerce. It’s valuable to delve into the company’s history and its owners, including opinions about the company, searching the internet or consulting other entrepreneurs, and directly engaging the entity itself. Failing due diligence in selecting a contractor carries legal consequences, potentially leading to accusations of knowingly participating in irregularities, resulting in further tax and legal sanctions.
Economic cooperation with Luxembourg:
According to the Central Statistical Office (GUS), Polish exports of goods and services to Luxembourg reached nearly 600 million EUR in 2022, with imports around 400 million EUR. The trade turnover between both countries increased by 25% compared to the previous year, primarily focusing on products from electromechanical, chemical, and metallurgical industries. National Bank of Poland data indicates that accumulated Luxembourgish direct investments in Poland by the end of 2020 reached nearly 30 billion EUR, ranking Luxembourg third among the largest European investors, following the Netherlands and Germany. Conversely, Polish investments in Luxembourg were significantly lower, around 3.5 billion EUR. As of the end of 2021, 1086 companies with Luxembourgish capital operated in Poland. Prospective areas of cooperation in the coming years include high-tech products, logistics, information technology, satellite and financial sectors (fintech), collaboration in space and mining technologies.
Economic relations between Luxembourg and Poland are chiefly governed by EU accession treaties and other EU regulations. Among the most crucial agreements is the Convention between the Republic of Poland and the Grand Duchy of Luxembourg concerning the avoidance of double taxation in income and wealth taxes dated June 14, 1995. In mid-2022, Polish entrepreneurs participated in an economic mission in Luxembourg, including the ICT Spring 2022 conference held in the country.
National and EU sanctions:
In response to the breach of Ukraine’s territorial integrity, the European Union imposed 11 sets of sanctions on Russia by June 23, 2023. Poland also enacted supplementary sanctions targeting key individuals in Russia and companies from both Russia and Belarus. Trading goods and services with Russian and Belarusian companies is prohibited. Polish entrepreneurs face financial penalties of up to 20 million PLN and up to 15 years of imprisonment for violations. However, Russian and Belarusian entrepreneurs have found ways to circumvent international restrictions by employing complex holding structures established in other countries, making it difficult to trace the true ownership structure.
OCCRP (Organised Crime and Corruption Reporting Project) is an international consortium of investigative journalists focused on tracking organized crime and corruption. In an article from February 8, 2021, representatives Antonio Baquero and Maxime Vaudano from Le Monde and Cecilia Anesi from IRPI revealed that a significant portion of Russian capital flows to and from Luxembourg. This tiny European country has become one of the largest foreign investors in Russia. However, Benoît Majerus, a history professor at the University of Luxembourg, stated that Luxembourg isn’t investing in establishing factories in Russia; rather, Russian money circulates through Luxembourg and returns to Russia.
Detailed information about the types of transactions banned by the EU concerning Belarus and Russia can be found on the European Council’s website: https://www.consilium.europa.eu/. The Official Journal of the European Union at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02014R0269-20220721 provides a list of individuals and entities subject to sanctions. The Polish Ministry of Internal Affairs and Administration also maintains an updated registry of entities under sanctions, allowing verification of contractors, their affiliations, reasons for listing, and applied sanctions: https://www.gov.pl/web/mswia/lista-osob-i-podmiotow-objetych-sankcjami.
The initial step in verifying a Luxembourgish company involves checking whether it appears in any of the aforementioned registries. Additionally, Regulation (EU) 2022/576 dated April 8, 2022, amending Regulation (EU) No 833/2014 regarding measures restricting Russia’s destabilizing actions in Ukraine, serves as a valuable source of information.
Verifying a contractor can be entrusted to professional business intelligence agencies specializing in such inquiries. Private detectives in Warsaw, Poznań, Wrocław, or other cities possess expertise in accessing necessary verification information about current or prospective contractors.
The most critical way to verify a contractor and their potential connections with Belarus or Russia involves determining the actual beneficiary and checking whether they are listed on the aforementioned sanctions list maintained by the Polish Ministry of Internal Affairs and Administration. The Central Register of Beneficial Owners maintained by the Minister of Finance: https://crbr.podatki.gov.pl/adcrbr/#/wyszukaj provides insights that can be instrumental.
A publicly accessible method to gather information about a contractor involves searching online resources. Scrutinizing a company, checking its website, reviews, or any publications about it can provide valuable insight. If unsure and unwilling to conduct this independently, entrusting a research agency specializing in professional business intelligence is a viable option. Various sources beyond the internet exist, such as querying the Polish Embassy in Luxembourg regarding specific entities or complaints from other entrepreneurs. Similarly, Polish-Luxembourgish chambers of commerce may offer relevant information.
Direct inquiry to the contractor:
In cases where establishing the ownership structure of a business partner through available registries poses difficulties, another method within business intelligence involves directly asking them to confirm their real beneficiary. To authenticate the provided response, requesting the Luxembourgish entrepreneur to provide documents validating their claims can add credibility.
Polish and EU registries:
The Ministry of Entrepreneurship and Technology, as the minister responsible for the economy, maintains a register of representations of foreign entrepreneurs. Locating our contractor’s representation in this registry suggests their current existence and business operations.
Another such registry is the European Union’s VAT taxpayer registry and the EORI registry. Enterprises and individuals engaging in commercial activities within the Union must use an EORI number as their identification in all customs procedures. The VAT Information Exchange System (VIES), a search engine administered by the European Commission, verifies whether an entity is registered for intra-community transactions, crucial for applying a 0% VAT rate. If VIES does not confirm the contractor’s registration, verification can be requested from the tax office in their country of residence. Additionally, confirming whether a company holds necessary permits and certificates, if mandated in a particular country, is advisable. The EU Business Register (http://www.eubusinessregister.org/) enables the search for companies worldwide.
The Insolvent Debtors Register allows checking if a contractor is listed. Moreover, credit information agencies like BIK (Credit Information Bureau), established by the Polish Bank Association, aggregate data on the credit history of bank clients, credit unions, and non-banking financial institutions.
Luxembourgish company registries:
Luxembourg Business Registers, under the Minister of Justice, consolidate three separate registers:
- RCS – Registre de Commerce et des Sociétés: Trade and association register.
- RESA – Recueil Electronique des Sociétés et Associations: Electronic register of companies and associations.
- RBE – Registre des Bénéficiaires Effectifs: Register of beneficial owners. All three are available in French, German, and English. Entities obligated to register include individuals operating as entrepreneurs, companies, branches established in the Grand Duchy of Luxembourg by commercial and civil law companies, economic interest groupings, and European economic interest groupings subject to the laws of other countries, associations, and foundations, insurance companies.
The registries contain legal data (name, address, capital, legal representatives’ identities, fiscal year, court decisions, etc.) and financial data (annual financial reports). Searches can be conducted via registration number or entity name. Documents filed in the registry are available for free, while extracts, certificates, or certified copies are available for a fee: https://www.lbr.lu.
The Commission de Surveillance du Secteur Financier (Financial Sector Supervisory Commission) website enables searching for entities registered in Luxembourg and supervised by CSSF. The service is available in English and French: https://www.cssf.lu/en/.
InfoClipper, a commercial business search engine encompassing global companies, including those from Luxembourg. It provides access to registration and financial information about Luxembourgish entrepreneurs. Searches can be performed using the official registry number. Users can also obtain document images like company statutes and annual financial reports filed by the company: https://www.info-clipper.com/en/company/search/luxembourg.lu.html.
Verifying a Luxembourgish contractor thoroughly before engaging in transactions or collaboration is advisable, particularly in terms of their potential associations with Belarus or Russia. Violating restrictions on specific types of trade with these countries and specific individuals and companies may result in financial penalties of up to 20 million PLN and imprisonment ranging from 3 to 15 years. Furthermore, verifying a contractor and exercising due diligence in their selection are perpetual requirements in conducting business, incumbent upon entrepreneurs as professional market participants.
Do you now know how to check a company from Luxembourg? If not or if you require more detailed information, we can assist you. Feel free to contact us.