Ethics and governance in the European Financial centers

The government has just adopted a draft law to modify the penal code and introduce corporate liability.
This change to the legislation is to comply with international standards (Council of Europe, UN, OECD) in the framework of the fight against money laundering, corruption...


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The report relatinf to laundering the Proceeds of VAT Carousel Fraud was published today. Il identifies the global impact of money laundering generated by the fraud and details the characteristics of the money laundering cycle from the proceeds of the fraud to investment into legitimate economy.

See press releaseSee report

The Methodology for Assessing Compliance with the FATF 40 + 9 Recommendations is the methodology followed in the mutual evaluation program to assess countries’ AML/CFT systems. It was revised by the FATF in February 2007 and available online today.

See methodology

19-23 March 2007, Strasbourg

GRECO adopted its Seventh General Activity Report (2006) – including a chapter on “the protection of whistleblowers”, which represents an important tool for combating corruption in public administration. The section also addresses a number of issues for Member States who are seeking to create a whistleblowing culture.

For the second part of the meeting devoted to a Start-up training seminar on the transparency of party funding (Theme II of GRECO’s Third Evaluation Round), GRECO’s representatives were joined by their national Evaluators nominated in the framework of the Third Evaluation Round. The enlarged audience (more than 100 participants) heard presentations from international experts specialised in this field, focusing on transparency, supervision and sanctions. The conclusions of the workshop will provide valuable guidance to evaluators and to GRECO, in particular in view of the first wave of Third Round on-site visits to be organised during June/July (Finland, Slovakia, Slovenia and the United Kingdom).

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The SFBC (Swiss Federal Banking Commission) published recently its latest annual report.

The report underlines that in 2006, there were a number of widely publicised cases where attempts were made to test the ethical borders and that debate on this topic is entirely desirable: it reflects the sensitivity of the issue, encourages the necessary awareness and documents the extent of the potential loss of reputation – irrespective of any breach of supervisory or indeed criminal law. The Banking
Commission is monitoring this development closely. Ultimately, the Commission grants licences only to those who enjoy a good reputation and guarantee proper conduct of their business activities.
Those who overreach the borders of ethical conduct undermine trust in the financial centre. Yet trust is the greatest asset it has to offer. A climate of trust that has taken a long time to establish can be destroyed in an instant. It is based on personal integrity and expert solutions; and supervisory authorities also have a role to play.

See summary in English
See full report in French
See full report in German

One of the key objectives of then ewly established Financial Crime & Intelligence Division (FCID) is to assess the nature and scale of financial crime and our performance in tackling it. It is often said that no reliable figures exist for financial crime, and many others suggest that the Financial Services Authority (FSA) should focus solely on tackling financial crime rather than measuring it.

A survey was carried out and released yesterday. In conducting this survey it became apparent from a very early stage that the FCID would not be able to establish the quantum of financial crime in the UK. After all, firms are unable to see the complete picture, and there was a common perception among respondents that all people involved in the fight to reduce financial crime can only see the tip of the iceberg. Despite this, the FCID is continuing to explore the potential for establishing a recognised methodology to assess the scale and incidence of
the financial crime in the UK.

See report

Compliance Week is an excellent newsletter on corporate governance, risk and compliance that reaches over 40,000 financial and legal executives at U.S. public companies.

Many of these companies are involved in the European Financial Centers through their subsidiaries.

Anchored by the columns and insights of numerous governance experts—including former SEC Chairman Harvey Pitt, and COSO internal control framework co-author Richard Steinberg—the weekly electronic newsletter is complimented by a special print edition delivered monthly to all subscribers.
Relentlessly focused on the disclosure, reporting and compliance requirements of our subscribers, Compliance Week has quickly emerged as a leading resource in this constantly-changing market. Published every Tuesday by Boston's Financial Media Holdings Group, Inc., Compliance Week strives to provide news, analysis, databases, and other resources that might help our subscribers and their peers comprehend and comply with the latest regulations


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Yesterday a conference took place in Paris to discuss the topic "Creating an Area of Criminal Justice in the European Union : Beyond the legal texts"

The organisator was The European Judges and Prosecutors Association (EJPA) , that aims at :
- gathering together judges, prosecutors and citizens from the European Union and from countries who have applied to EU membership, interested in matters of judicial cooperation ;
- improving the mutual knowledge of our judiciary systems.

Judges and prosecutors from eleven European countries discussed in Paris what is to be done to turn theory into practice. How to move beyond the legal texts towards a culture of systematic cooperation between national judicial authorities in the EU?

Luc Frieden, who is Minister of Justice in Luxembourg, opened the conference. Despite weaknesses in Luxembourg because in many cases negligence has replaced pragmatism he is willing to build an efficient legal and regulatory framework even though professionals may repudiate the will (Cf. the draft law to transpose the second directive and reactions to remove from the text sensitive provisions)

Detailed conference programme: http://www.amue-ejpa.org/en/contenu.php?id=2

Transparency International (TI) has submitted a follow-up letter to the Secretary General of the Organisation for Economic Cooperation and Development (OECD) calling for specific action to be taken on the UK government’s decision to terminate the investigation of allegations of bribery by BAE Systems Plc (BAeS) in the UK-Saudi Arabia Al Yamamah defence contract. BAeS, Britain’s largest defence contractor, has throughout denied any wrongdoing.

The letter is the latest contribution by the TI secretariat and TI’s national chapter in the UK to efforts by a large coalition of civil society organisations to press the OECD to persuade the UK government to undo the damage caused by the termination of the investigation.

TI asks that the OECD urge the UK government to promptly undertake the following:

- Reinstate the investigation and move ahead with prosecutions in foreign bribery cases where justified by evidence, without further delays.
- Encourage BAeS to make a public statement making clear that it is following a strict anti-bribery policy, backed up by a rigorous compliance programme, consistent with the best practices of leading MNCs. Provision should be made for independent verification of BAeS compliance programme.
The letter goes on to say that TI believes that the UK government’s assertion that national security interests justify the termination of the Al Yamamah investigation violates Article 5 of the Convention. A recent brief from Yale University Law School indicates that a party to the OECD Convention cannot claim a national security exception simply by asserting that national security interests would be damaged by proceeding with a foreign bribery investigation or prosecution. The brief, which was sent to the OECD on 7 March 2007, can be read in full in the attachment below.

The timing of the letter precedes the OECD’s Working Group on Bribery, which meets tomorrow to review the UK government’s response to the March 2005 OECD Phase 2 Report and the Japanese government’s response to the June 2006 Phase 2 bis Report. The Al Yamamah issue also is on the agenda of the meeting.

Both the UK and Japanese governments have performed poorly on enforcement of the OECD Convention and are under scrutiny by the OECD Working Group on Bribery. Their poor performance also was noted in the 2006 TI Progress Report on the OECD Convention’s Enforcement.

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The IRE (Institut des Réviseurs d'Entreprise), which is the regulatory body for external auditors in Luxembourg, is currently reviewing its quality control process.
One must underline the transparency of this review with a public consultation that is evidence of a will to be credible.

A first draft was proposed last fall; contribution received were commented and integrated when estimated relevant.

A new draft was released last Friday. A couple of weaknesses remain in the new version that is anyway better than the first one:
- The text doest not seem to take into account the international role of Luxembourg : when assessing breaches in Luxembourg auditors should not define a national view but integrate foreign fiscal doctrines and judicial cases involving auditors;
- Disciplinary cases should be communicated without the name to demonstrate that the disciplinary matter is actually working and provide with accurate information on the disciplinary doctrine;
- Files that are disregarded due to a judiciary procedure should be kept in mind by the committee to be examined when the judiciary procedure is completed for debrief.

In a nutshell because Luxembourg is a small country where everybody knows everyone and where tolerated dysfunctions may be traced in public and official sources, the jurisdiction cannot transpose minimum requirements from directive or international texts (IFAC, FATF...). Such texts are designed by and for bigger jurisdictions that do not have the stake of financial center that cannot afford standardised negligence.

Know more (IRE Website)