Ethics and governance in the European Financial centers

The annual report 2007 of SICFIN, the Monaco FIU, informs of the staffing of SICFIN and of its positioning:

Le SICCFIN, est un service administratif relevant du Département des Finances et de l’Economie qui répond à la définition internationale des Cellules de Renseignements Financiers. Le service est composé de 9 agents, spécialement commissionnés et assermentés. Le personnel du SICCFIN possède un profil bancaire et financier, complété par des connaissances juridiques, avec, pour certain, une spécialisation en audit et en contrôle. Ces compétences sont également complétées par des stages auprès d’autres CRF, notamment CTIF-CFT. A ce titre, des échanges réguliers ont lieu avec TRACFIN ainsi qu’avec la Commission Bancaire française afin de confronter les expériences de chacun en matière de lutte contre le blanchiment de capitaux et le financement du terrorisme.
Depuis 2005, le SICCFIN est doté d’un nouveau système informatique développé afin de répondre aux besoins nés de l’évolution de son activité.


There are 9 people with a banking and financial profile.
It is like most FIUs an administrative body under the responsibility of the Ministry of Finance.



The annual report 2007 of the CRF, the Luxembourg FIU, informs of the staffing of the CRF and of its positioning:

La structure de la CRF est demeurée identique à celle existante pour l’exercice précédent, à savoir qu’elle est composée de deux magistrats à plein temps, d’un magistrat à mi temps, d’un analyste financier et d’une secrétaire. Les activités de la CRF se déroulent sous la direction du Procureur d’Etat Robert BIEVER et du Procureur d’Etat Adjoint Jean-Paul FRISING. La CRF est épaulée dans ses devoirs de renseignement financier par un membre de la Section Anti-Blanchiment du Service de Police Judiciaire. Les quatre autres membres de cette section se consacrent plus particulièrement aux enquêtes pénales proprement dites (enquêtes préliminaires, informations judiciaires, exécution d’ordonnances prises dans le cadre de l’exécution de certaines commissions rogatoires internationales dans lesquelles le blanchiment est libellé par l’autorité requérante).

There are 4.5 people including a secretary in the CRF stricto sensu plus the support of members of the Service de Police judiciaire.
The CRF acts under the supervision of the prosecuting authorities.





We have seen that the number of declarations of suspicion in Luxembourg is not consistent with the importance of assets managed. The ratio of Suspicious Transaction Reports per $1billion in assets for Luxembourg, fund industry excluded, is 6 times less than Monaco

If I take into accounts only banks, as I have a comparison point with Monaco, the number of declarations of suspicion in Luxembourg is not consistent with the business activity in the jurisdiction.

In 2007, of 156 banks, 63 only reported a declaration of suspicion, which is almost the number of banks in Monaco according to CIA World Factbook. This means that 60% of banks in Luxembourg never ever had a dubious client to be reported to the FIU. This is not serious and is definitely worrying for the enforcement of the AML procedures in the jurisdiction.


My observations are consistent with the Narcotics Control Strategy report 2009, which observes that in Luxembourg the scarce number of financial crime cases is of concern, particularly for a country that has such a large financial sector.

Luxembourg Prime Minister Jean-Claude Juncker said interesting things in an interview published Wednesday in le Temps.

Let's comment a couple of sentences freely translated.

The current bludgeoning disturbs me because it is based on an imposture while associating bank secrecy and tax haven, and because it does not hold any account of our public opinion.

Which public opinion? Who decides in the country?
Bankers actually decide. For example they created banking secrecy that was not in the Luxembourg tradition.

At the moment when G20 decide to increase regulation and to do a detailed examination of tax havens, its members have to be beyond any reproach. At the European Summit, it is my intent to ask for action. It is essential that British Territories, dependants of the British Crown (note by the editor: Jersey, Guernsey ...) in turn accept banking information exchange. I don't see either how the present review of the European Savings Directive can continue to ignore the British "Trusts", being at this moment out of the Detective's reach. The United Kingdom cannot continue to shelter large European fortunes from their national fiscal authorities. I want to take this a step further: it would be an aberration that the G20 would think about including Switzerland and Luxembourg in a blacklist, without including American States such as Delaware, whose LLC's (Limited Liability companies, note by editor) are exempt of any taxation! Morality in fiscal regulation matters is only credible if it is integral. Courage, and I bring this to France's and Germany's attention, has to be international."

I can agree with the paragraph, but I will say again that the British regulator is much more credible in its duty than the Luxembourg regulator.
Additionally, in the UK there is a public debate with people like Richard Murphy or Prem Sikka or John Christensen that do not have their equivalent in Luxembourg, where everyone agrees to hush up issues and protect Mammon.

This is a huge difference between both jurisdictions.

And by accusing other jurisdictions while not questioning on dysfunctions in his own jurisdiction, Prime Minister Juncker is not willing to correct what harms the reputation of Luxembourg.

The Tagesanzeiger has reported that OECD Secretary-General Angel Gurría provided a new list, on which financial centres with banking secrecy, such as Switzerland, Luxembourg and Austria, are optically separate from the tax havens.

According to the OECD, tax havens would be:
Andorra
Anguilla
Antigua and Barbuda
Aruba
Bahrain
Belize
Bermuda
BVI
Cayman Iceland
Cook Iceland
Dominica
Gibraltar
Grenada
Guernsey
Jersey
Liberia
Liechtenstein
Marshal Islands
Monaco
Montserrat
Nauru
Netherlands Antilles
Niue
Panama
Saint Lucia
Saint of cement and Nevis
Saint Vincent and Grenadinen
Samoa
San Marino
The Bahamas
Turks and Caicos Islands
Vanuatu

According to the OECD, Financial centers would be:
Austria
Belgium
Brunei
Chile
Costa Rica
Guatemala
Hong Kong, China
Luxembourg
Macao, China
Malaysia (lab SCN)
Singapore
Switzerland
The Philippines
Uruguay


The idea of splitting meets my idea of black list and grey list, but the way it was done raises a question of governance at the OECD:

As the Tagesanzeiger explained, the splitting was made under the pressure of representatives from Switzerland, Luxembourg and Austria that only said they will cooperate : but there a difference between announcements and actual implementation of the commitments.

This means that the three jurisdictions that represent less than 3% of the OECD budget would decide of the standards and policies of the OECD regarding harmful tax practices and other connected matters (corruption, or money laundering in the framework of the FATF that has the same contribution shares as the OECD).

There respective Contribution share in percentage is the following:
Switzerland: 1.5
Austria: 1.146
Luxembourg: 0.216

Total: 2.862 % of the OECD budget.


When looking carefully the lists, it appears that
- every OECD member is in the good list ; in other word no OECD member is a tax haven.
- there are many inconsistencies in the List: what about the Seychelles, Delaware... for the tax havens list? What about the City... for the financial centers list?