Ethics and governance in the European Financial centers

The Council of Europe’s Group of States against Corruption (GRECO) has published recentyly its Third Round Evaluation Report on Luxembourg. The report, which was adopted on 13 June 2008, has been made public following the agreement of the authorities. It focuses on two distinct themes: criminalisation of corruption and transparency of party funding.

In practice, the number of convictions for corruption remains very low.

The first report is the most interesting. A footnote is very relevant to explain the reason why the number of cases coming before the courts appears to be very small: Limited police access in law and/or practice to administrative and financial information at the preliminary inquiries stage, tax data base scattered over several local authorities, lack of staff in the investigating authorities, who concentrate on important and priority cases, no "whistle blowing" arrangements and in some cases reporting hindered by professional confidentiality, excessively strict rules on the burden of proof in criminal law, room for improvement in relations between the prosecution service and investigating judges, and so on (...) A prosecutor has stated that even though banking confidentiality has been relaxed in recent years, the non-banking financial sector and financial institutions such as trust funds were still very reluctant to impart information. Certain lawyers stressed the importance of relationships and networks of persons in Luxembourg society, the difficulties faced by the police in dealing with complex economic and financial crime, particularly because of lack of legal and other resources, and the ease with which companies can be established in Luxembourg. (Cf. page 18 of the report "Criminalisation of corruption" [theme I]).

This is exactly what I keep saying :
- " the importance of relationships and networks of persons in Luxembourg society" is what I called the Luxembourg system and can be demonstrated in official and public sources that are the visible part of the iceberg,
- "the ease with which companies can be established in Luxembourg" is an example what I called the fraud catalyst with for example companies with the statutory auditor located in the BVI and therefore that is controlled neither by the Luxembourg registered accountants nor the Luxembourg registered auditors : notaries should not accept that especially when the shareholder and/or the managing director does not comply with the requirement of professional standing,
- "lack of staff in the investigating authorities" and " lack of legal and other resources" : this is one of the reasons why I said that the "generous grant" to the FATF is a problem because the jurisdiction lacks means to fight economic and financial crime all the more than such grants are not a normal funding of the FATF. Additionaly, the problem is that in its report the FATF actually provided Luxembourg with recognition while the financial center does not care of GRECO and OECD working group on bribery Recs : the sentence "Thanks to a generous grant from Luxembourg, the FATF has been working to improve its information technology systems" actually demonstrates the recognition with positive words like "thanks" and "generous". The wording should have been at least more neutral like "A grant from Luxembourg allowed the FATF to improve its information technology systems". FATF statement that promotes and congratulates Luxembourg definitely weakens the credibility of the international fight againt corruption.

By the way, the ADDENDA to Compliance Report relating to the 2nd evaluation round still remains confidential.

Read press release
Read Third Round Evaluation Report Theme I
Read Third Round Evaluation Report Theme II