No transparency, please

Ranking billionaires is impossible in Luxembourg. The small country has one of the strictest anti-transparency regimes in Europe – which even influenced EU rules. Here’s how.

Franziska Peschel, Correspondent for Luxembourg | Published on 13 September 2023

Luxembourg protects its wealthy. Of course, there are a handful of shady super-rich people, and there is the Grand Duke. There is no public information about who is wealthy, and the super-rich in Luxembourg are more discreet than in other countries. No American-style bragging, no scandalous escapades.

Luxembourg has the EU’s highest minimum salary as well as Europe’s highest GDP per capita. According to the research institute Capgemini’s 2022 World Wealth Report, 46,200 millionaires are registered in Luxembourg, one in 15 residents. Nevertheless, neither Forbes nor The Times Magazine list Luxembourg residents in their rankings of the world’s wealthiest. However, there are quite a few super-rich individuals in Luxembourg. In 2014, the World Ultra Wealth Report by Wealth X estimated that 17 billionaires live in Luxembourg, a lot for a country with less than a million inhabitants. Who these people are remains a secret, though, and even the number is a result of estimations and calculations, not robust data. In more recent editions of the billionaire census, Luxembourg isn’t mentioned.

Billionaire’s databases, comparative wealth studies and rankings of the superrich usually use a combination of several data sets based on tax administration information, surveys, and data about the value of privately held companies as well as invested capital from stock markets. None of these information sources are public in Luxembourg. Tax administration data can only be viewed after 100 years. Researchers can apply for an exception, but even then, the data would hardly be revealing because private individuals don’t have to declare assets in their tax returns anymore since 2005. Not even government administrations know how much the residents own.

Whereas investigative journalists have dug out some information about the businesses and funds that are registered on Luxembourg’s soil, private fortunes are locked behind walls of data protection. This lack of transparency makes it nearly impossible for researchers to analyse the distribution of wealth and inequality in Luxembourg. The gap between the wealthiest and the poorest is getting bigger, but researchers can’t say to which extent. There is no tax on large fortunes and no tax on heritage for direct heirs either. Wealth stays in the families instead of benefitting the state. In March, the local newspaper Luxemburger Wort wrote about the lack of a heritage tax: “Nobody really dares to touch on the topic. Even trade unions are very careful in their demands.”

The state, however does benefit from the fortune-friendly policies as they attract foreign wealth. Companies and individuals alike choose to settle in this small country or at least park their money on Luxembourgish bank accounts. Germany’s entrepreneur dynasties have registered their businesses in Luxembourg. Amazon’s European headquarters is based in Luxembourg as well as Pornhub’s mother company – not because of the country’s geographical accessibility but because of low taxes. International businesses, investment funds, foundations – many are registered in Luxembourg, which is known as a tax haven.

In the past decade, Luxembourg was shaken by several financial scandals which manifested this reputation. In 2014, French whistleblower Raphaël Halet helped an international team of journalists to create a case around the so-called Luxleaks, uncovering tax avoidance schemes in Luxembourg. Six years later, the Süddeutsche Zeitung wrote: “Despite all investigations and scandals, the tax haven Luxembourg continues to attract international businesses and wealthy individuals by giving them an easy time.” Nothing had changed. In 2021, investigative journalists with the research project OpenLux proved that Luxembourg was a hub for money laundering, used by Russian mafia bosses as well as Italian organised crime gangs. The research showed that more than 250 billionaires have shares of Luxembourg-based companies. Tiger Woods and Cristiano Ronaldo park their money in Luxembourg, as well as Shakira and the King of Bahrain, Le Monde reported in 2021.

In reaction to the multiple financial scandals and to comply with a 2018 EU directive which required the creation of public registers of the real owners of companies, the government established the beneficial owners’ register (RBE), an open database where the public could see who benefits from which companies, in 2019. The RBE was a huge step towards more transparency. The register lists the details of everyone who holds at least one-fourth of a Luxembourg-based company – at least in theory; many companies’ data was lacking. The businesses are obliged to keep the register updated, but many beneficiaries have failed to report their shares. The financial crime unit of the police tried to track them down and fill in the gaps. The life span of the public register, though, was short. Before the police could make an effort, the RBE went down again in November 2022 – thanks to a man called Patrick Hansen. Hansen successfully managed to limit transparency not only in Luxembourg but all over the European Union.

Patrick Hansen is the founder and CEO of the company Luxaviation, a provider of private and business jet flights. According to the investigative magazine Reporter.lu, nearly 150 million euros went into Hansen’s Luxaviation from Russian funds and offshore companies. Reporter.lu, together with several outlets in Germany and France, investigated the money flows that made Luxaviation the world’s second-largest provider of private flights in only a few years. Over the past 16 years, Hansen has been owner or CEO of 117 companies worldwide, Reporter.lu concludes. Much of the money is linked to the Russian energy industry and oligarchs loyal to Putin. Other funds came from Luxembourg-based funds, which Russian moguls also own. Russian money is no stranger to Luxembourg’s economy. In November 2022, after the EU announced the block of Russian money in Europe in a new sanctions package, Luxembourg’s minister of foreign affairs, Jean Asselborn, said that nearly one-third of all frozen Russian assets were stashed in Luxembourg, 5.5 billion euros.

Patrick Hansen is the brother of Luxembourg’s Minister of Digitalisation, Marc Hansen. Whether he has influenced his brother in politics is not known. This kind of relationship isn’t rare in Luxembourg. There are only a few Luxembourgish families whose offspring make it into high positions in finance, industry or politics. Many of them know each other because they either grew up in the same neighbourhood, went to the same high school or shared family ties.

Hansen, together with an anonymous representative of the accounting company SOVIM, filed a complaint over the RBE, claiming the register violated their privacy. After failing in Luxembourg’s courts, they succeeded on a higher level. In November 2022, the European Court of Justice (ECJ) decided in favour of Patrick Hansen and ordered not only Luxembourg to restrict RBE access for the public but also all other EU countries that hold similar registers. The ECJ’s decision has been seen as a harsh regression in the fight against money laundering – especially because it closes down such registers while Europe is trying to freeze the assets of Russian warmongers.

Transparency has been declining, and Luxembourg’s billionaires have stayed silent. Establishing a ranking of the wealthiest is impossible. Only a few names make the headlines once in a while. How much money they own and if there are wealthier ones is unknown.