Ethics and governance in the European Financial centers

The Minister of Justice in Luxembourg recently published the Annual Report 2007.
There are a couple of pages relating to AML (pages 136 to 140).

As I already wrote, the FIU in Luxembourg is the prosecuting authorities and does do a good job that limit the risk of scandal in a lax business environment where issues are hidden or hushed up.

If the number of declarations of suspicion in Switzerland increased, this is not the case in Luxembourg despite the center is growing.

Year Number Percentage
1998 114 2,08
1999 109 1,99
2000 158 2,88
2001 413 7,54
2002 631 15,11
2003 828 15,11
2004 943 17,20
2005 831 15,16
2006 754 13,76
2007 700 12,77
Total 5481 100


To assess the lax environment one must take into account the financial power of the Center and not the size of the country.

The ratio in Luxembourg compared to Switzerland demonstrates the lax business environment, what is called locally prag-ma-tism.

Read report (in French)

According to the Financialm Times, UBS has told members of its former private banking team responsible for rich US clients not to travel to America.

Read article

A former UBS private banker charged with helping a US client evade millions of dollars in taxes is set to plead guilty at a court hearing next month

Business Times

IHT

Xavier Bettel, who is member of parliament in Luxembourg has recently asked a parliamentary question relating to the absence of publication online of judiciary cases in Luxembourg compared to other countries.
I dont know what the minister is gonna answer but the actual answer is simple : in Luxembourg leaders either professionals or politiciens do not like transparency on issues that are either hidden or hushed up.

Evidences ?

- No TI chapter in Luxembourg compared to Switzerland and the UK,
- no involvement of the Luxembourg big four entities in international surveys of their brand relating to fraud or corruption : for example "Global Economic Crime Survey" for PwC and "Corruption or compliance – weighing the costs" for E&Y
- CSR without ethics in Luxembourg compared to Switzerland and the UK
- etc.

Xavier Bettel's question

A Beat Balzli and Frank Hornig from the Spiegel wrote, after fighting Switzerland's banking secrecy laws for decades, European finance ministers are about to receive support from the United States. Investigations into major Swiss bank UBS and a proposed law against tax havens are ratcheting up pressure against the system.

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Richard Murphy recently observed that the Swiss Private Banker’s Association has looked at the consequences of making tax evasion a criminal offence in Switzerland (where it does not have that status at present) and has found that after asking someone they call a highly regarded expert on the subject - Professor Xavier Oberson, of Geneva University that the change would lead to an overall revision of Switzerland’s tax system.

Richard concluded that there will be those who will argue long and hard in Switzerland for retaining its corrupt ways, but it’s more likely many are now seeing the reality of their future, and are rapidly reconciling themselves to a world in which surviving of the wages of fraud looks like a cosy little number whose days were always going to be numbered.

Read Richard Murphy's post

The OECD is being urged to update the evasion blacklist as only three countries currently remain on the OECD list of tax havens: Liechtenstein, Monaco and Andorra.

As the Financial Times reported, quoting a French Official: "There are some countries which said they would co-operate and which were then removed from the list, but in practice they have not at all".

For instance, in the context of the Liechtenstein scandal, that should inciter to be careful, when

1) officials are bold enough to state that "It is not our duty to control if the tax payer was honest" or "Banking secrecy remains : Luxembourg is not compelled to communicate its clients'data"

2) some bankers agree to facilitate tax evasion from Liechtenstein to Luxembourg.

such center is unfortunately not reliable and trustable anymore: neither for the investor whoever he or she is, nor for organisations like the OECD.

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The PFP has reported that Switzerland's largest bank, UBS, has disclosed that the US Justice Department is investigating whether its bankers helped wealthy Americans evade paying income tax on their investments and that the Zurich-based bank said it was cooperating with both the Justice Department and the SEC.

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US Senators Carl Levin and Barack Obama (Democrats) and Senator Norm Coleman (Republican) have introduced a bill, with the unwieldy title of "Incorporation Transparency and Law Enforcement Assistance Act" (summary here.) Its declared intention is "to protect the United States from U.S. corporations being misused to commit terrorism, money laundering, tax evasion, or other misconduct."

Know more

TJN

Senator levin's website

Senator Obama's website

A German TV channel wanted to know if German banks would agree to discreetly move money of clients having an account in Liechtenstein towards Luxembourg ; according to a documentary diffused last Monday evening, three banks reached at the request of a journalist playing the prospective client.
The adviser of the first bank praised the high standards of safety of the country which allowed anonymous placements with numbered accounts. This adviser even proposed the discrete transfer of the money from Liechtenstein to Luxembourg.
The adviser the second bank specified that the bank had great experience in the field and that there was nothing to fear coming from its head office.
The adviser of the third bank was more careful, informing the factitious clients of the risks on bleaching but presented the various means possible to place money without paying tax.
The adviser of the fourth bank refused to advise the customer.

The documentary is perfect implementation of Lucien Thiel's doctrine : that's to say
- It is not our duty to control if the tax payer was honest,
- Banking secrecy remains : Luxembourg is not compelled to communicate its clients'data.


As far as professionals and politicians in Luxembourg are concerned, they underlined that the TV documentary was only based on the German point of view that is not the Luxembourg point of view and that it was a trap against Luxembourg to weaken the country in the debate relating to banking secrecy.

While the Liechtenstein scandal is recent, what is extraordinary the absence of guilt-feelings and the feeling of impunity.


I guess the FATF enjoys Luxembourg's generous grant that shoul have never ever taken place.


Know more :

Article in French from L'Essentiel

Script of the documentary in German

Documentary in German : Wie die Landesbanken in Luxemburg helfen, Geld am deutschen Fiskus vorbeizuschleusen (As the Landesbank in Luxembourg help to smuggle through money at the German treasury)

Debate in German : Landesbanken in Luxemburg helfen Geld am deutschen Fiskus vorbeizuschleusen (Landesbank in Luxembourg help to smuggle through money at the German treasury)