Shedding Light on Big Secrets in Tiny Luxembourg
Dodgy money from around the world has poured into secretive shell companies based in Luxembourg. Here’s why it was possible — and how we exposed them.
Key Findings
Despite reform efforts, Luxembourg is still an opaque jurisdiction, where mandatory disclosure rules for companies and individuals can be circumvented and sanctions are rarely enforced.
One year after the creation of a new register of ultimate beneficial owners, barely half of Luxembourg companies have declared at least one UBO. Only one fifth of investment funds based there have done so.
Dozens of foreign citizens linked to corruption, embezzlement of public funds, organized crime, and tax crime have opened companies in Luxembourg, seemingly without raising red flags, suggesting a failure in the regulation of the corporate industry.
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Credit: Sergiu Nicolae Brega
In 2019, an announcement appeared in the Spanish press. A major stake in one of Spain’s largest weapons manufacturers, Maxamcorp, had been sold.
The Spanish government approved the deal, and everything seemed to be proceeding normally. But for those following closely, the situation was bizarre: Nobody knew who the real buyer was.
On paper, it was Prill Holdings, a company based in Luxembourg. But who was behind Prill?
The only available information about the company’s owners showed two firms registered in the Cayman Islands. These are linked to a U.S. private equity company, Rhone Capital, but little else is known about them. To some, the opacity was disturbing.
“It is unacceptable that the Spanish government is greenlighting a company to operate in a sector that has many human rights implications without knowing who is behind it,” said Susana Ruiz, Tax Justice Coordinator for Oxfam International.
OCCRP’s FAQ on the OpenLux Project
Why does Luxembourg matter? What’s a beneficial owner? Where did the OpenLux data come from? And how did OCCRP and partners manage to use it, anyway?
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Prill isn’t the only mysterious company registered in Luxembourg. Though it’s one of the smallest nations in the world, Luxembourg hosts an enormous amount of financial activity, almost all of it originating abroad. Nearly 90 percent of companies registered in the country are controlled by non-Luxembourgers. At least 266 members of the Forbes billionaire list — none of whom are locals — have companies there. And about 40 percent of Luxembourg companies were set up merely to hold assets, without generating any other economic activity.
Essentially, the country functions as an offshore hub in the heart of Europe.
Many Luxembourg companies are in full compliance with the law and exist for legitimate reasons. But others are owned by people with political exposure, corrupt officials, and even organized criminal groups.
The biggest draw might be Luxembourg’s reputation for secrecy. This has made it a magnet for people seeking to “disconnect themselves from their holdings,” says Gabriel Zucman, an associate professor of economics at the University of California, Berkeley.
Holding assets in Luxembourg companies “is going to make it harder for authorities to link assets to their owners, which is going to make it harder for authorities to investigate cases of corruption or fraud or tax evasion,” he said. “That’s the key service that’s provided by this segment of the financial industry.”
So much Russian capital has found its way to Luxembourg — and back again — that the tiny European state is now one of Russia’s biggest foreign investors. “That is not because Luxembourg is investing to build factories in Russia,” says Benoît Majerus, a history professor at the University of Luxembourg. “It is clear that it is Russian money circulating in Luxembourg and returning to Russia.”
Italian prosecutors say members of the ’Ndrangheta mafia have flocked to Luxembourg, seeing it as an “extremely attractive” place to keep ill-gotten cash out of reach.
And investigators in at least three South American countries are looking into allegations that political figures stashed bribes in Luxembourg companies.
“We are worried,” Laurent Lim, a policy officer for the European Commission’s Directorate-General for Financial Stability, told OCCRP. “Luxembourg is known for this matter of taxation, but we must also start talking in terms of money laundering.”
“Until last year there was no transparency,” he added. “Until last year a company could be created and there was no way of knowing who was the beneficial owner.”
Now, there is — at least, in theory.
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https://www.occrp.org/en/openlux/shedding-light-on-big-secrets-in-tiny-luxembourg