Ethics and governance in the European Financial centers

When looking the website "Luxembourg For Finance" (http://en.luxembourgforfinance.lu/index.html) there is a quotation from the IMF in the page dedicated to the prevention of anti money laundering: "Luxembourg has in place a solid legal framework and supervisory system to adress the challenge of money laundering".

When having a look at the report that is linked, it appears that the report is not based on the current legislation, the assessment being based on the information available at the time it was completed on November 30, 2003 (Information and Methodology used for the Assessment, page 4 of the report). It is said about Criminalization of ML and FT page 5 that "a new draft law has been adopted in first reading by the Parliament which would substantially amend the legal framework, but it has not been taken into consideration in the AML/CFT assessment since it is not yet in force. If adopted in its present form, however, it would result in a legal framework likely to fall short in some important respects of the requirements of the revised FATF recommendations, particularly as regards predicate offences, customer due diligence, and the operation of the financial intelligence unit (FIU)."
Report: http://en.luxembourgforfinance.lu/imperia/md/content/luxembourgforfinance/financial-centre/liberal-legislation/cr04399_1_.pdf

The problem is that the law was not adopted in the form on which the IMF based the statement. There were a debate with on one side professionals that did not want strict rules, and on the other side the Prosecutor's office that was warning that it would be a shame to have a legislation that would not be effective, a "Potemkine village".
The debate is traced in French in parliamentary documents, especially what was said by the Prosecutors' Office.

Professionals won, but not AML : the text was amended to reduce the penal risk for professionals notably by introducing pragmatically the word "sciemment" (i.e. knowingly) : in order to obtain a conviction for money laundering, prosecutors must now prove criminal intent rather than negligence, which was a positive sign for all those who do not have a proper conduct in business operations. Negligence, however, is still scrutinized by the CSSF.

Some professionals regret the failure of the draft. For example, Victor Rod, who is Director of the Insurance Commission of the Grand-Duchy of Luxembourg. He was one of the author of the strict requirements Victor Rod is worrying about the next assessment by the IMF because of the changes to the draft all the more as the market supports requirements like those that were removed.

In the report of activity dated March 2006 page 119, the Prosecutor's office states that is most case it will be unable to prove the « sciemment » introduced by the law of 12 November 2004 and that they lack staff.

Figures of declarations of suspicion show a turn after the law of 12 November 2004 while business is still being developed :

1998 : 114
1999 : 108
2000 : 158
2001 : 413
2002 : 631
2003 : 828
2004 : 943
Law
2005 : 831


There is a gap between the official communication and what is stated by the Prosecutors' Office that is on the field.



To know more

Victor Rod's interview (in French)