Ethics and governance in the European Financial centers

Supporting actually a financial center means sentencing, especially in cases of criminal breach of fiduciary duty. This reflects need to protect reputation of Island’s financial services industry and is a positive sign of ethics all the more as issues are transparent.

FRAUDULENT CONVERSION—factors for consideration

Six years’ imprisonment is an appropriate sentence for an accused convicted of a multi-million pound series of fraudulent conversions, committed to fund his neurotic addiction to gambling. Whilst a plea of guilty (which saves time and cost) and remorse are mitigating factors, the fact that his gambling has been encouraged by others is not. Furthermore, the court should have regard to the effect of the offence on the reputation of the Island’s financial businesses (Hayden v. Att. Gen., 1985–86 JLR N–23, considered; Att. Gen. v. Delaney, Royal Court, May 13th, 1993, unreported, considered; R. v. Aucott (1989), 11 Cr. App. R. (S.) 86, dictum of Watkins, L.J. considered; R. v. Barrick (1985), 7 Cr. App. R. (S.) 142, considered).
Att. Gen. v. Hanley (Royal Ct.: Crill, Bailiff and Jurats Coutanche, Vint, Bonn, Orchard, Hamon, Le Ruez, Herbert and Rumfitt), October 14th, 1993.

FORGERY—sentence—breach of trust—mitigating factors

The appellant was an accountant who had pleaded guilty to 15 counts of forgery, uttering and obtaining money on false instructions and fraudulent conversion, involving £52,600 of funds administered on behalf of clients in England. The proceeds were used primarily to relieve his liabilities incurred mainly through unsuccessful investment. He sold his business and left the Island leaving the problems unresolved and a considerable sum of money unaccounted for. He appealed against a sentence of four years’ imprisonment.
Held: The appellant’s behaviour amounted to a gross breach of trust and it was of paramount importance that the reputation and integrity of the financial businesses on the Island should be preserved. Nevertheless, important mitigating factors were the appellant’s total co-operation with the police, his previous good behaviour and subsequent remorse, his intention to repay and his actual repayment of some of the money, and the occurrence of the offences over the relatively short period of five years. The sentence would be reduced to one of three years, based on the particular circumstances of the case, without making any comment on appropriate tariff levels (R. v. Pemberton (1982), 4 Cr. App. R. (S.) 328, distinguished).
Hayden v. Att. Gen. (C.A.: Neill, Clyde and Collins, JJ.A.): July 10th, 1985.

More cases in the financial sector

Every year, U.S. officials from agencies with anti-money laundering responsibilities meet to assess the money laundering situations in 200 jurisdictions. The review includes an assessment of the significance of financial transactions in the country’s financial institutions that involve proceeds of serious crime, steps taken or not taken to address financial crime and money laundering, each jurisdiction’s vulnerability to money laundering, the conformance of its laws and policies to international standards, the effectiveness with which the government has acted, and the government’s political will to take needed actions.

The Bureau for International Narcotics and Law Enforcement Affairs publishes a table. It assessed the actions by government :



As far as Luxembourg is concerned, the financial center has a correct legal and regulatory framework. The only weakness is the international transportation of currency : there are no law or regulation allowing the jurisdiction, in cooperation with banks to control or monitor the flow of currency and monetary instruments crossing its borders. Of critical weight here are the presence or absence of wire transfer regulations and use of reports completed by each person transiting the jurisdiction and reports of monetary instrument transmitters.

The last paragraph of the detailed report is : "The Government of Luxembourg has enacted laws and adopted practices that help to prevent the abuse of its bank secrecy laws, and has enacted a comprehensive legal and supervisory anti-money laundering regime. However, further action should be taken to address issues such as the lack of a distinct legal framework for the Financial Intelligence Unit and the small number of money laundering investigations and prosecutions. The Financial Intelligence Unit should work with regulatory agencies to formulate and issue substantive guidance to financial institutions on anti-money laundering trends and techniques. Luxembourg should continue to strengthen enforcement to prevent abuse of its financial sector, and should continue its active participation in international fora. Luxembourg should enact legislative amendments to address the continued use of bearer shares and the lack of crossborder currency reporting requirements."

To reject the French MPs' report about Luxembourg Luc Frieden said in Paris that Luxembourg is not a tax, banking or judiciary haven and explained that their statements were not verified on the field.

The official communication for the financial center states as well that "Contrary to a widely held misconception, Luxembourg is not a tax haven and has many other characteristics which make it internationally attractive. It is, however, stated Government policy to create conditions which will allow the Luxembourg Financial Centre to compete on equal terms with other important financial centres. Over the years, this policy has been translated into various measures such as the auspicious corporate tax of 30,38% and the different VAT rates applicable: 3%, 6%, 12% and 15%".


Let's have a look on the field.

Let's have a look on what is said by a Professional : "Despites moderate taxes rates Luxembourg is not a tax haven. There are taxes for individuals and companies. More than a tax haven, Luxembourg gathers the advantages of an on shore jurisdiction because it is in Europe and the advantages of off shore states taxes of which are similar to a tax haven for Holding 1929 companies, Holding companies' (SOPARFI)...".

Let's see what is said by another professional on the Benefits of the Place :
(...)
The economic policy of Luxembourg is characterized by its liberalism as regards establishment.
The policy pursued by the government encourages the private initiatives, the administration is with the service of the companies, and not the reverse.
The bank secrecy forms integral part of the Luxembourg legislative system.
Absence of local taxation for the non-residents, bearer shares, exemption of appreciations on the participations.
(...)
The abuse social good and tax evasion are non-existent in the Luxembourg law.
The majority of the daily expenses of the leaders can pass in load.
(...)
Anonymity is a paramount concept in the Grand Duchy whose keystone is the bank secrecy.
The economic recipient with the possibility of not appearing as a shareholder and/or an administrator of the company by the installation of the contract of trust.
This contract is regulated by the Luxembourg law as well as the bank secrecy.
Trust is a notion absent from the French right, it makes it possible to transfer the legal property from its goods fiduciary while preserving the economic capacity on the aforementioned goods.
The application of trust makes it possible to manage its business very by preserving anonymity.
(...)
We irremediably entered a phase of delocalization which corresponds above all to problems of tax management and say for the company to a procedure of survival.

And the professional to specify that "thanks to X and has its partners Attorney and Lawyers, you can within the framework of an economic beneficiary, own and manage your business without appearing officially. That can be practical for the detention of goods and real estate , or for the continuation of an activity

The best is the legal page where the fiduciary explains that :
- it does not support fraud, and
- it is not responsible for verifying the compliance with laws and regulation, which is up to the client.



Considering such public marketing communication, that is not repudiated, how can Luc Frieden be so affirmative when saying that Luxembourg is not a tax, banking or judiciary haven for people that do not have a proper business conduct ?