Ruling [LUX] ¦ AML Failures and Mail Handling Led to Criminal Sanction for Centre Operator

Judgment confirms risks of clandestine domiciliation – Luxembourg case signals tougher scrutiny for business centers

On 13 November 2025 the Luxembourg Tribunal d’arrondissement, seventh criminal chamber, approved a negotiated judgment in a prosecution that began after police and administrative inspections revealed that a company operating business-center services had in practice provided domiciliation services without being authorised to do so. The public prosecutor and the two defendants – the limited liability company formerly known under another name and its legal manager – concluded an agreement under the procedure for judgments on agreement (articles 563–578 Code of Criminal Procedure). The court recorded the facts admitted by the parties, accepted the agreed penalties and ordered the confiscation of seized documents and digital records.

The dossier stems from an initial police report of September 2021 and a related investigation opened by the prosecutor. The firm had leased multiple office sites and sub‑let workspaces under a commercial brand offering an «address commerciale» along with ancillary services such as mail handling, meeting rooms, reception, cleaning, IT support and accounting assistance. Police on‑site inspections and follow‑up reports showed hundreds of companies registered at the three addresses operated by the firm, a configuration of shared, non‑exclusive and very small workspaces, centralised handling of mail and parcels, and staff‑managed mailboxes with non‑private, non‑secure boxes. The administrative authority (AED) had already imposed an administrative fine for breaches of anti‑money‑laundering obligations linked to such services.

Legal issues and applicable law

Luxembourg law reserves the domiciliation of companies to specific regulated professions. Article 1 of the modified law of 31 May 1999 lists authorised domiciliaries: credit institutions and other regulated financial or insurance professionals, lawyers admitted in Luxembourg under the relevant lists, statutory auditors and certified public accountants. The legal rationale is twofold: to ensure that the provision of a registered office and related services is entrusted to actors subject to professional oversight, and to avoid proliferation of shell addresses that can damage the integrity and reputation of the financial centre.

Article 4 criminalises serving as a domiciliary without being a member of the permitted professions. The statute imposes criminal penalties – imprisonment and fines – and also targets those who, in bad faith, establish a company’s seat with an unauthorised domiciliary. Jurisprudence and supervisory guidance, including a CSSF communication, clarify that the distinction between simple commercial lettings (leasing and co‑working) and domiciliation hinges on the substance of the services provided and the operational realities at the premises: exclusivity and permanence of office occupancy, the size and security of private workspaces, the number of companies sharing a small physical footprint, active reception and distribution of mail, telephony and visitor handling, management of meeting rooms, and additional support services are all relevant indicators. A change of address followed by the same group of companies, repeated representation at corporate meetings by the same persons, and the existence of client lists or KYC‑style procedures point to domiciliation.

Bastian Schwind-Wagner _Follow

"The Luxembourg judgment highlights that the distinction between simple office leasing and domiciliation depends on operational reality rather than labels. Services such as centralised mail handling, shared non‑secure mailboxes, reception of visitors and advertised “address” offerings can expose business‑center operators to criminal and administrative liability.

Operators and advisers must reassess their service models, clearly document the scope of services and apply appropriate KYC and AML safeguards when activities approach domiciliation. Where necessary, obtain required professional authorisations to avoid regulatory and criminal risk."

Findings in this case

Investigators documented that the company ran three sites where 167 to several hundred legal entities had their registered offices. On total office space of around 1,601 m² the police identified roughly 293 tenant entries, yielding an average of about 5.5 m² per tenant and in many cases much smaller individual desk spaces. Photographs showed shared, unsecured mailboxes per site, and staff described daily centralised receipt and internal distribution of mail and parcels. Employees confirmed they handled mail, kept mailboxes and sometimes stored accumulated correspondences and packages; one worker explained he had duplicate keys to tenants’ offices for cleaning and small tasks. The operator’s websites advertised an «address commerciale» and a range of services beyond mere lease provision, including meeting room bookings, reception of visitors and support contacts for banks and notaries. The firm had implemented procedures resembling client identification checks (KYC), a function that should apply to domiciliation services under AML rules.

Taken together, the factual matrix indicated that the company’s offering went beyond provision of physical space and constituted domiciliation services: centralised mail handling, non‑exclusive and undersized workstations, a large number of companies registered at the addresses, staff actively managing correspondence and visitors, and commercial messaging promoting an address service. The administrative tribunal’s earlier decision upholding an AED fine for AML breaches reinforced the classification of these activities as services linked to companies and, therefore, potentially subject to domiciliation rules.

Admissions and sanctions

Under the negotiated agreement the company and its manager admitted that from at least 9 March 2020 they had served as domiciliary for multiple companies at the three addresses without qualifying as authorised domiciliaries. The parties agreed to penalties that the criminal chamber found appropriate: a corporate fine of EUR 12,500 and a personal fine of EUR 2,500 for the manager, with a statutory period of custody defined in case of non‑payment. The court also ordered the confiscation of specific contracts, client lists and numerous seized PDF files and accounting ledgers that had been collected during police searches and investigations. The judgment ends the public prosecution against the defendants for the facts covered by the agreement.

Implications for financial crime prevention and compliance

This ruling sends clear signals for operators of business centres, co‑working spaces and similar service providers. The boundaries between a landlord offering deskspace and a domiciliary providing an address and support services are fact‑driven: advertised services and operational practices matter. Regulators and courts will look at the substance of the relationship with client companies, not merely contractual labels.

Key practical takeaways for compliance officers, legal advisers and property operators are:

• Review service offerings and client communications. Marketing an «address commerciale» or listing mail handling, receptionist services, meeting room hosting, bank or notary contacts draws the activity into the scope of domiciliation and therefore into regulated territory.
• Assess physical arrangements. High tenant density relative to available private office space, shared unsecured mailboxes, and limited permanent occupation of workstations are strong indicators of domiciliation rather than straightforward leasing.
• Separate landlord functions from domiciliation services. Pure leases with tenants exercising genuine, permanent activity on site and with private, secure mail delivery are less likely to trigger domiciliation rules. When additional services are offered, structure them so responsibilities and safeguards comply with applicable AML and professional regulations.
• Implement robust client due diligence when services approach domiciliation. The presence of KYC‑style procedures in the case confirmed authorities see client identification and recordkeeping as central to domiciliation obligations and AML compliance.
• Consider licensing and professional constraints. If a business model requires domiciliation services, operators must ensure that the service is provided by authorised professionals or under a compliant legal structure subject to supervision.
• Expect coordinated scrutiny. Administrative and criminal enforcement intersect: failure to meet professional and AML obligations can trigger fines, administrative sanctions and criminal prosecutions.

Conclusion

The Luxembourg judgment is a reminder that appearances and business labels are subordinate to operational realities when authorities assess whether domiciliation rules apply. As financial centres strengthen controls against misuse of corporate seats for illicit finance, the case underlines the need for clear governance, careful product design for business‑support services and strict adherence to AML and professional rules. Operators of business centres and advisers must reassess risk, separate and document tenant services clearly, and, where necessary, seek the appropriate authorisations or restrict services to remain within landlord activity.

Dive deeper

• La Justice Grand Duché de Luxembourg ¦ Décisions intégrales des juridictions judiciaires ¦ Link
• Journal officiel du Grand-Duché de Luxembourg ¦ Code de procédure pénale ¦ Link
• CSSF ¦ Law of 31 May 1999 (consolidated version) governing the domiciliation of companies ¦ Link
• CSSF Communiqué ¦ Domiciliation activity carried out as part of the operation of a business center or coworking space (only in French) ¦ Link

Subsequent to the case:

• Journal officiel du Grand-Duché de Luxembourg ¦ Loi du 29 juillet 2022 portant modification: […] 3° de la loi modifiée du 12 novembre 2004 relative à la lutte contre le blanchiment et contre le financement du terrorisme; […] ¦ Link
• EUR-Lex ¦ CJEU’s Case C-22/23, Judgment of the Court (First Chamber) of 18 April 2024 ¦ Link