Caritas Luxembourg likely lost around 61 million euros ($67 million) due to “fake president fraud,” the public prosecutor’s office said Tuesday.
The Aug. 6 statement by the Luxembourg public prosecutor’s office suggested that the investigation is shifting away from an individual arrested last month — reportedly a Caritas Luxembourg employee — toward external actors.
The “Caritas affair,” which has shaken the small country bordering Belgium, France, and Germany, came to light last month, prompting anger among government officials and a national debate about the oversight of charities receiving state funds.
The scandal also raised doubts about whether Caritas Luxembourg — one of the country’s largest charities and a member of the Caritas Internationalis network — could continue to pay the salaries of its almost 500 employees, who provide services to some of the poorest people in Luxembourg and around 10 other countries.
Local media have reported that the 61 million euros were transferred from Caritas Luxembourg to Spanish accounts in installments of less than 500,000 euros between February and July this year. The transfers reportedly required the electronic signatures of the financial director and two other members of the management team. The authorities have not confirmed the reports.
“In the course of the investigation into the embezzlement of funds from Caritas, it became apparent that the fraudulent transfers were in all likelihood linked to the process commonly called ‘president fraud,’” the public prosecutor’s office said, referring to a practice also known as “fake president fraud” and “CEO fraud.”
The office, which underlined that the investigation is ongoing, explained that “in general, president fraud consists of tricking an employee authorized to make payments to an organization into paying a false invoice or making an unauthorized money transfer.”
“The fraudster pretends, by telephone or email, to be a manager or a representative of the entity’s manager, and demands an urgent international payment, usually to bank accounts in other countries, but always to accounts managed by the fraudster,” it said.
“The duped employee may also be asked to disregard the entity’s ordinary authorization procedures, with the aim of enabling an allegedly unusual operation or secret mission, such as a tax audit or an imaginary merger or acquisition.”
According to the U.S. insurance agency Marshall & Sterling, law enforcement officials have seen a significant rise in “fake president fraud” in recent years.
The Luxembourg Times reported that the local public prosecutor’s office recorded 11 cases of the fraud in 2023, up from three the year before.
A briefing note by Marshall & Sterling said that the scam typically begins when a criminal pretending to be an executive, such as a company president or CEO, contacts an employee at the target organization who is authorized to transfer money.
The “president” convinces the employee to wire money to a foreign bank account for a seemingly legitimate purpose. If the employee resists, the criminal employs psychological pressure tactics, including appeals to authority, tight deadlines, and the need for strict confidentiality.
If the employee makes the transfer, the target organization’s bank may approve it without raising questions as the employee is authorized to make payments.
Marshall & Sterling recommended combating the scam by educating employees about how “fake president fraud” works, insisting on strict protocols for transfers, and establishing guidelines for verifying urgent or unusual requests.
The “Caritas affair” has generated substantial media coverage in Luxembourg, a prosperous country with a large banking sector.
After Caritas Luxembourg filed a complaint July 16, the public prosecutor’s office requested the opening of a judicial investigation into suspected forgery, fraud, breach of trust, and money laundering, among other crimes.
On July 22, the office said that an individual had appeared for questioning and was arrested. The person was later released from custody.
Luxembourg’s Prime Minister Luc Frieden has insisted that the charity, which provides services for the homeless and refugees with state money, will not receive “a single euro” more of public money amid the scandal.
Frieden discussed the crisis Aug. 5 with the country’s deputy prime minister and foreign minister, education minister, family minister, finance minister, and health minister.
The government officials, who will hold a further meeting next week, “discussed various issues and options relating to the continuation of the activities provided by Caritas on behalf of the state,” according to an Aug. 6 press release.
“The ministers also set up a follow-up committee of senior officials to examine various legal and practical issues,” it said.
Caritas Luxembourg announced July 31 the creation of a crisis committee.
The committee, led by former chartered auditor Christian Billon, will “have the power and agility to take the necessary decisions to restore the confidence of donors, the general public, and public authorities in the entities,” it said.
The committee will be supported by the accounting firm PwC Luxembourg, which will “conduct the investigations required to uncover the facts.”
In an Aug. 6 update, Caritas Luxembourg said the committee had decided to create two new structures. One will take over “all national activities,” while the other will oversee “all international cooperation activities.”
“Mr. Christian Billon is currently in constructive discussions with Prime Minister Luc Frieden on the continuation of activities which, through these two new structures, will enable a rapid return to stability for employees and beneficiaries,” the charity said, adding that it will pay its employees’ August salaries.
Pope Francis is due to make a daylong visit to Luxembourg Sept. 26, during which he will meet the prime minister and the head of state Grand Duke Henri.
Later, he will meet with the Catholic community at Notre-Dame Cathedral, the seat of the Archdiocese of Luxembourg, led by Cardinal Jean-Claude Hollerich, S.J., who also serves as the synod on synodality’s general rapporteur.
A spokesman for the Luxembourg archdiocese has said it is closely monitoring the Caritas crisis.
