Ethics and governance in the European Financial centers

The CSSF in Luxembourg has a poor communication relating to fines. The only source of public information is the annual reports.
Furthermore, when looking the annual reports since 2002 we may see that the number and the amount of fines is not credible compared to those of the FSA (See article “FSA transparence on sanctions").
In 2002, in two cases fines of EUR 8,000 each were imposed on account of transmission of information that proved to be incorrect; in two other cases, EUR 1,500 fines were imposed because the managers did not communicate the required information by the CSSF. The CSSF also imposed disciplinary fines of EUR 1,500 each on persons responsible for the daily management of two PFS on account of refusal to transmit information as required by CSSF Circular 01/40 on professional obligations of financial professionals within the scope of the fight against money laundering and the circular letter of 19 December 2001 on the same matter. The CSSF imposed EUR 495.78 disciplinary fine on each of the three persons responsible of a SICAV for their refusal to communicate the management letter. In 2002, the CSSF imposed disciplinary fines of EUR 12,500 on each of the managers of a financial intermediary. These fines were imposed on the one hand because of communication
of incomplete, incorrect, and, in certain cases, even false information, and on the other hand on the account of non-compliance with provisions relating to internal organisation, rules concerning stock exchanges and rules of conduct.
In 2003, the CSSF required the departure of six managers and directors : in two cases, the legislation concerning money laundering was seriously infringed; the other cases concerned unprofessional and deontological incorrect behaviour relating to the granting of a credit which resulted in a loss for the bank. The CSSF imposed disciplinary fines of EUR 1,500 each on persons responsible for the daily management of three PFS on account of refusal to transmit information relating to the closing of previous financial years.
In 2004, the CSSF required the resignation of two managers: in one case, the legislation governing money laundering was seriously infringed; the other case was about unprofessional and deontologically incorrect behaviour with relation to a client. The CSSF also imposed disciplinary fines of EUR 1,500 each on persons responsible for the daily management of four PFS on account of refusal to transmit information relating to the closing of previous financial years
In 2005, the CSSF did not fine any professional.

Compared to the FSA in the United Kingdom, except for year 2002 probably due to the "11 September effect", the number and the amounts are not dissuasive enough to prevent improper business conduct all the more as there is no communication on the issues. One must keep in mind that 14% of the total Offshore assets are in the United Kingdom compared to 16% in Luxembourg and 28% in Switzerland (Source : Merrill Lynch, Capgemini, Vontobel Equity Research, quoted by Le Temps, 14 Septembre 2005)). Therefore One should expect the same level of sanctions.

Furthermore the requirement for proper business conduct is not implemented as it should be compared to what is done by the Swiss Federal Banking Commission in Switzerland (See article “Proper conduct : Luxembourg v. Switzerland” )


CSSF Reports

See abstract of the report 2002
See abstract of the report 2003
See abstract of the report 2004
See abstract of the report 2005