Ethics and governance in the European Financial centers

I have mentioned several times on this blog the “system”. Time is up to quote a couple of examples of this "corruption catalyst" specific to Luxembourg.

1) A litigation between a foreign legal person or individual and a local legal person or individual. The local legal person or individual causes prejudice. The foreign legal person or individual decides to be a party to legal proceedings. For that he/she/it appoints a Luxembourg lawyer. This lawyer, who is a client’s friend in the local networks, calls the local legal person or individual, meets with him/her/it and agrees to do the minimum by not raising what could make the local legal person or individual feel uncomfortable before the court.
This situation is very common:
- Foreign client of a bank v. Luxembourg bank that did not do its duty,
- foreign supplier v. Luxembourg client that does not want to pay,
- etc.

The foreign party does not win.


2) Individuals with decision making power, including in the framework of a disciplinary action, join a board of directors in an association where they meet those for which they have the decision making power or disciplinary power. A member needs a decision in his/her favour and contact the member of the board to obtain the favour. If the favour is relating to a disciplinary action he/she may raise the risk of reputation for the association.

Due to the pressure, some of these individuals with decision making power may forget their duty.


3) A member of an audit team finds a possible money laundering situation involving management of the audited company and reports the issue to the audit leader or partner. The audit leader or partner that
- meets management of the company in associations like ABBL or ALFI,
- plays the golf with management of the company,
- has possibly received a generous grant from the company with a view to providing the leader or the partner with with better time management tools : a new PDA to manage appointments, a new watch to be in time... (as neither the OECD nor the GRECO experts on corruption did repudiate the "generous grant" that the FATF officially received from the Luxembourg I guess auditors may accept such "grants" that are complementary to audit fees),
- does not forget that the relation between auditors and auditees in actually a commercial relationship, which means that if he/she report the declaration of suspicion he/she would loose the clients’ confidence (and probably prospects’ confidence).
Decides to condone the issue.

Due to the fear of exclusion, some professionals do not do their duty.

The existence of the networks is admitted page 18 of the last GRECO report about Luxembourg when underlining "the importance of relationships and networks of persons in Luxembourg society" to explain the reason why the number of cases coming before the courts appears to be very
small (Greco Eval III Rep (2007) 6E, theme I, 13 June 2008, published on 25 August 2008).