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Practices and Recommendations aimed at reducing the risk of money laundering and terrorist financing in the Luxembourg Fund Industry

The ALCO, ABBL and ALFI published a document that is to be considered as guidance on best practice for the Luxembourg fund industry in the light of the requirements of the law of 12 November 2004 on the fight against laundering and terrorist financing and the CSSF circular 05/211. It suggests a risk based approach in relation to customer identification and transaction monitoring in alignment with international standards, including the FATF recommendations, the European Directive 2005/60/EC on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing and the Wolfsberg Statement on “Anti-Money Laundering Guidance for Mutual Funds and Other Pooled Investment Vehicles”. It provides a methodology to assess the
equivalence of legal and regulatory Know-Your-Customer requirements of foreign jurisdictions by comparing them to FATF standards. The extent to which actors in the fund industry follow the described practices and recommendations is under the responsibility of their respective governance bodies.
The purpose of the document is furthermore to amend and replace the ABBL/ALFI “Practices and recommendations aimed at preventing the use of UCIs for money laundering” dated March 2000 and the ALCO document “Money laundering prevention in the framework of the transfer agent of a UCI administered in
Luxembourg” dated May 2003.

The document shall not hide the low level of sanctions in Luxembourg for those who do not have a proper business conduct compared to other centers, and the deep fraud culture expressed in the debate relating to the draft law of 12 November 2004. It shall not hide as well the fact that despite ethical statements, the reality as described by the FIU in Luxembourg is quite different.

If finance is not the devil and making money is not a dirty thing, a key point is the credibility of a financial centre.

There must not be any discrepancy between what is said and what is seen especially in official and public sources. This is critical for a small centre like Luxembourg where people are very close due to the size. Therefore there must not be any tolerance.

As the GRECO stated in 2004 (Group of State Against Corruption) "The often cited small size of the country, the fact that everyone knows everyone else(thus encouraging self-regulation) and the high level of incomes cannot therefore be taken to be a sufficient safeguard and could even have the opposite effect, with everyone sheltering behind acomplicit silence rather than running the risk of being considered indelicate" (report dated 14 May 2004).
Everybody meets everyone and no one is willing to take the risk of being excluded from the "system" (either job or business contract) by deploring the dysfunctions even though these are in official and public sources.

I have published several articles and a book in french based on official and public sources about risks specific to this center (see articles in english about Luxembourg on this blog) : no reaction either from professional institutions or officials.

There is no will to fight generalised negligence, bad management and bad governance. I have even been told that some professionals are afraid by the researches and publications. I can only say that may be afraid only those who show or support public and official generalised negligence, bad management and bad governance as I do not want to use any confidential information.

The reaction of fear (and reject) demonstrates that many people are not as respectable as they said they are.

Therefore the centre is not self regulated but drifts are self maintained.

If generalised negligence, bad management and bad governance are not repudiated when visible and do not comply with Ethical statements, what about the invisible part of the iceberg ?

See document

11:45 Posted in Luxembourg | Permalink | Comments (0)


Compliance in Luxembourg

The audit firm Deloitte and the Luxembourg Bankers’ Association (ABBL) published a brochure relating to the impact of compliance on financial institutions in Luxembourg.

They wished to ascertain how the banks and FSPs (Financial Services Professionals) in the Luxembourg financial centre had implemented the extensive regulatory changes made in the past 3 years.

One may find it strange that an auditor should publish with auditees all the more when auditees consider officially that offences such as forgery, use of forgery, false balance sheets, use of false balance sheets or unauthorised use of corporate property are offences with financial connotations which are confused with laundering for the sole purpose of applying exceptional powers to these vague offences.
The Luxembourg FIU did not agree with the ABBL's statements at the time of the debate relating to the transposition of the Second European Directive relating to AML.

Anyway, with such official publication (there are both logos on the cover page) Deloitte in Luxembourg appears unfortunately on auditees' side rather than on the controlling side, which is not a good thing fot the independence and the efficiency of auditors.

Auditors may discuss with auditees but shall not publish with them in any case. They may publish with the body responsible for the prudential supervision of companies of the financial sector (CSSF in Luxembourg) or the Financial Intelligence Unit (CRF in Luxembourg).


ABBL Report 2003
Press release Deloitte/ABBL
Brochure Deloitte/ABBL

06:05 Posted in Luxembourg | Permalink | Comments (0)


Financial Institutions, markets and ethics : Mixed approaches in the European context

A very interesting Conference will take place at the European University Institute of Florence on May 25-26, 2007 on the subject :
"Financial Institutions, markets and ethics : Mixed approaches in the European context"

The following areas will be covered :
- Financial stability in Central Eastern Europe
- Financial and banking transformation in a macro perspective
- Ethics in Banking Institutions
- Finance and governance
- Corporate finance in perspective
- Stock market, financial product and banking systems
- Financial markets and ethics

Know more

08:25 Posted in General | Permalink | Comments (0)

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