PROFESSIONAL VALUATION SERVICES

LE FREEPORT Luxembourg

6 August 2019

Carole Schmitz

With its intense security, tight government supervision, 100% customs inspections and adherence to the strictest anti-money laundering regulations, the article asks why would criminals choose LE FREEPORT Luxembourg for their activities.

Carole Schmitz is Directrice commerciale et évènements of LE FREEPORT Luxembourg.

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LE FREEPORT Luxembourg is a high secure state of the art storage facility located at the Luxembourg airport “Findel” and dedicated to the storage of valuables such as art, fine wines, precious metals, antiques as well as high value communication systems, rare minerals and data.

LE FREEPORT, which opened in 2014, manages the free zone of Luxembourg, a geographical area that was created by a ministerial decree in 2012 for the creation of the free zone. LE FREEPORT, which is built on land owned by the Luxembourg Government, is a private company that manages the free zone with a commercial authorisation. It is a private-public-partnership and all laws applicable in Luxembourg and the EU are fully applicable in the free zone. Furthermore, LE FREEPORT has signed a convention with the Luxembourg Customs Authorities (Administration des Douanes et Accises or ADA) to ensure compliance with all the rules and regulations set forth in this document. The licensed operators – the tenants of the Freeport - are also obliged to be compliant with this agreement. A breach of this convention would result in LE FREEPORT and its tenants facing an immediate removal of their commercial authorisation by the Government.

LE FREEPORT Luxembourg

Security Measures

LE FREEPORT is categorised as a Type 1 free zone, subject to the regulations of the Union Customs Code with Customs officers physically present to check all goods and passengers entering and exiting the free zone. LE FREEPORT is the management company of the 22,000m2 facility and rents out office and storage space which varies from 100 to 350m2 to companies specialising in storage or trading of high value goods – the licensed operators and service providers. LE FREEPORT offers state of the art security with 24/7 surveillance and constant monitoring with over 300 cameras strategically placed on the outside and inside perimeters. Onsite and offsite Customs officers have access to all the cameras. The delivery trucks, which have to be announced at least 24 hours before arrival, are subject to the following security checks: authenticity check of passports by using an application called VISOGO, developed by a Luxembourg GIE (INCERT), X-ray machine, human presence detection in vehicles, explosive detection, prohibited substance detection and heat detection. All movements inside the Freeport are monitored by cameras and a computer controlled access system. LE FREEPORT offers the latest technologies to ensure the safe and secure storage of valuables by providing a constant temperature of +/- 21C° and a humidity level of +/- 55% in its storage rooms. The walls are fire resistant for up to 90 minutes and each storage space is equipped with a special fire extinction system based on injecting nitrogen and has seismic detectors.

Due to all the safety and security procedures in place, LE FREEPORT obtained in 2017 a score 99.6% based on the independent audit platform GRASP(Global Risk Assessment Platform). This score results in a very low insurance premium for the final customers and is one the main advantages to store goods at LE FREEPORT. LE FREEPORT is also certified ISO:9001 for quality management system and ISO:45001 for occupational health and safety by the TUV Rheinland. In June 2019, LE FREEPPRT was certified Safe Zone Platinum by the World Free Zones Organizations: a certificate based on a Code of conduct developed together with the OECD to determine the most transparent and secure free zones in the world.

LE FREEPORT Luxembourg © LE FREEPORT

Participants within the Free Zone

To better understand the operations at LE FREEPORT, there are 6 main participants within the free zone:

Police Grand-Ducal (PGD): The PGD is responsible for outside perimeter of the free zone. Being located at the airport, the airport police patrols the outside border on an hourly basis;
Luxembourg Customs Authority (ADA) is the supervising entity of the free zone, with 3 customs agents physically present to ensure, supervise and verify 100% of the goods entering and 100% of the goods exiting the Freeport. ADA is also in charge of verifying the inventory of all the goods stored inside the Freeport. This inventory is shared in real-time between ADA and the tenants;
LE FREEPORT is the managing authority of the free zone and is responsible for the access control, security and safety services and the maintenance for the technical equipment and installations. LE FREEPORT only rents storage space to licensed operators and service providers. However, museums and art foundations can also become tenants directly of LE FREEPORT and manage their collections themselves;
Licensed operators: The tenants of the Freeport, who are companies specialising in high value logistic such as MT ART, Fine Art Logistics Natural Le Coultre, Brinks, SWS. The licenced operators will have received a licence from Luxembourg Customs Authorities to operate within the free zone and store goods for their clients who are for example collectors, funds, museums, galleries etc.;
Service operators: Apart from the licensed operators, LE FREEPORT has other tenants called service operators. Service operators are companies that offer auxiliary services to the storage services offered by the licenced operators. The auxiliary services include art acquisitions services, art financing, art expertise, collection management, insurance broker services etc. and are offered by companies such as Link Management, ArtGlor and Zilkens;
Anti-Fraud Administration (Administration de l'Enregistrement, des domaines et de la TVA or AED) is in charge of the special tax suspension regime inside the free zone and verifies the procedures in terms of compliance in relation to the anti-money laundering and terrorism financing laws applicable inside the Free zone.

Anti-Money Laundering Regulations

As of 2015, all companies established within the free zone are subject to the same anti-money laundering regulations as companies in the finance sector. Whereas the 5th AML Directive only applies to transactions made above €10.000, the economic beneficiaries of all the goods stored inside the Freeport in Luxembourg are recorded regardless of the value. LE FREEPORT and its tenants - the licenced and service providers are all subject to inspection by the Luxembourg anti-fraud administration. LE FREEPORT has all the compliance information about its tenants, who must themselves be in possession of information of the actual beneficial owner of each item stored inside the Freeport. Finally, the Financial Intelligence Unit (Cellule de Renseignement Financier or CRF) is tasked with national initiatives for combating and prosecuting money-laundering operations and LE FREEPORT has a direct online connection via Go-AML to send any information that is deemed to be relevant and in return answers any queries from the CRF.

Conclusion

There are over 2500 free zones in the whole world, which according to the World Free Zones Organization, World Trade Organization and OECD, represent 30% of the global trade. Free zones, which are originally intended to store temporary merchandise or even produce merchandise in a zone exempt from VAT and customs duties, have come increasingly under scrutiny, and especially LE FREEPORT Luxembourg. LE FREEPORT offers a suspension of VAT and customs duties during the period the goods are inside the Freeport. The free zone in Luxmebourg, is the only free zone in the world, applying anti-money laundering laws and the only free zone in the world, where Customs control 100% of the goods entering and 100% of the goods leaving the Freeport.

According to European Union data, 16,000 Customs warehouses existed in 2016. The Customs control rate of these warehouses is less than 1%. Taking into consideration these numbers, one might wonder why anyone wishing to hide merchandise, a transaction or valuables would take the foolish risk of storing goods or valuables in the one free zone applying 100% customs inspections and applying the strictest anti-money laundering regulations.

While Customs bonded warehouses in London, Paris, Brussels and Cologne may provide much larger storage facilities than LE FREEPORT’s 11,000 m2 storage space, they are not bound by any money-laundering regulations and have a control rate of approximately only 1% by the local Customs Authorities. Criminals who have a choice between such bonded warehouses and LE FREEPORT are very unlikely to choose Luxembourg which is under permanent state supervision.

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