Luxembourg to Propose Law on Money Laundering

The Luxembourg government said it plans to impose harsh penalties for money laundering, a move that follows the indictment by the United States of a bank based here on charges of cleansing drug money.

A spokesman for Prime Minister Jacques Santer’s office said the new law, which the government hopes to rush through parliament, aims to protect Luxembourg’s image as a financial center in the face of a worldwide flood of drug money.

“We have to prevent that money being placed here,” he said.

The Grand Duchy’s flourishing banking industry was thrust into the spotlight last month when the Luxembourg-based Bank of Credit and Commerce International was indicted in Florida on charges of taking part in an international ring that laundered profits from Colombian drug operations.

Luxembourg officials said the allegations mainly involved the bank’s operations in the Cayman Islands and Miami, and the government has said there is no evidence that the bank acted illegally in Luxembourg itself.

The new law will put money laundering on Luxembourg’s penal code for the first time and impose on those found handling cash earned from illegal activities the same penalties as already exist for drug traffickers.