Ethics and governance in the European Financial centers

The number of reports on suspicious transactions submitted to the Money Laundering Reporting Office of Switzerland (MROS) decreased for the second consecutive year in 2005. Most financial intermediaries under duty to report seemed to have less reason to suspect shady money transactions. Similarly, the number of reports from banking institutions decreased for the first time since the duty to report was introduced. As in previous years, the money transfer services accounted for almost half of the reports submitted. In its country assessment, the FATF evaluated MROS favorably.
While the number of reports received in 2004 had declined by 4.9 percent to 821 compared to the previous year, the number of reports further decreased by as much 11.2 percent to 729 reports in 2005. In 2005 MROS registered 11 percent, or 43, fewer reports filed by money transfer services―the business sector that accounts for the largest business volume― than in 2004.
In 2004, 75 percent of the sum total of reports was forwarded to the appropriate prosecuting authorities for further investigation. Of a total of 729 reports received by MROS in 2005, 504 reports (69 percent) were forwarded.
In 2005, the Financial Action Task Force (FATF) assessed the Swiss financial center and the measures for combating money laundering and terrorism financing for the third time. Also assessed was the cooperation of MROS with financial intelligence units of other nations. Taking into account the particular circumstances under which MROS operates, the FATF certified MROS as efficient and professional , an assessment that translates into »largely compliant« with FATF standards.

Declarations_of_suspicion_CH.pdf

FATF-GAFI_CH.pdf

Both Switzerland and Luxembourg have the same requirement for professionals in their law : all the guaranties of an irreprocheable activity i.e. all the guaranties of proper conduct of business operations :
- for Switzerland, see notably article 3 of Federal Act of 8 November 1934 on Banks and. Savings Banks and article 3 of Federal Act of 24 March 1995 on Stock Exchanges and Trading in Securities.
- for Luxembourg see articles 7 and 19 of the Law of 5 April 1993 on the financial sector, as amended.


We may state three observations :
- The wording is similar
- The requirement is stricter than the audit requirement that whould be a "raisonnable assurance" of an irreprocheable activity.
- the word irreprocheable itself is more extensive than licit and accept no drift in the behevior.


It seems that Switzerland is much more serious in the implementation of the requirement :
- thanks to a stronger communication and transparence on the issue that can be traced on the Web with a search engine,
- thanks to evidences of the implementation, especially in public judgements.

There are no evidence of an actual implementation in Luxembourg, especially on www.codeplafi.lu, which is the official extensive database, of all laws, regulations and circulars governing the regime and the activities of banks, of investment firms and other professionals of the financial sector, of insurance and reinsurance companies, the financial markets and instruments and the Luxembourg monetary status as well as to indications on case law and writings. We find only the text of the law and regulation. Most cases that are presented are relating to Bank secrecy.

On the opposite, there are many evidence that the system is actually living in Switzerland beyond the official texts. There is especially a circular that summerise the requirement and the implementation including law cases. This document is unfortunately available only in French and German.
Irreprocheable_activity_French_text_.pdf
Irreprocheable_activity_German_text_.pdf

A recent study from the Netherland shows the new rank order of attractiveness for all of the countries in the world. For the most part, these scores are logical and make sense.

The Tierce is :

Luxembourg 55,4
Switzerland 25.7
Liechtenstein 21-20

The higher the score, the greater attractiveness to money launderers.

The ABBL (The Luxembourg Bankers' Association ) issued a press release late March 2006 that was called "Dubious report on money laundering: the ABBL responds" to regret that the Dutch study entitled “The amounts and effects of money laundering” describes Luxembourg as the world champion on the “Attractiveness index for money laundering. This press release is no longer available on the press releases list.

ML_amount_and_effect.pdf
ML_amount_and_effect_2.pdf

Text from the ABBL :

Press release
29 March 2006
Dubious report on money laundering: the ABBL responds

The Dutch study entitled “The amounts and effects of money laundering” describes Luxembourg as the worldchampion on the “Attractiveness index for money laundering”.On 21 February 2006, the ABBL already registered a protest with the Finance Minister of the Netherlands,who had commissioned this report, against the gratuitous statements made in this document and its lack ofprofessionalism.

The ABBL deplores the fact that, behind a pseudo-scientific façade, this document calls into question thereputation and standards of the Luxembourg Financial Centre in general and of its members in particular.Luxembourg is a long-standing member of the Financial Action Task Force (FATF). Its efforts to preventmoney laundering have recently been highlighted by international organisations, such as the InternationalMonetary Fund (IMF). Luxembourg was one of the first countries to impose penalties for money launderingand currently applies particularly stringent laws and practices in this area.

The ABBL has serious doubts about the methods used to draw up the study. Although it has been written byan academic institution, the conclusions do not reflect a serious scientific approach.

The assessment is arrived at using a formula with several variables. One key multiplier is GDP per capita,often regarded as an indicator of the “wealth” of a country and of its inhabitants. On that assumption, thericher a country is, the more “laundering” takes place there. Moreover, for the comparison to be pertinent inthis particular context, allowance would at least have had to be made for non-resident cross-border labourwhich represents 40% of total employment in the Luxembourg economy.

In its letter to the Netherlands Finance Minister, the ABBL particularly regretted the fact that a study of lowscientific value, which is prejudicial to Luxembourg and to its Financial Centre, should have beencommissioned by a long-standing political partner.

Contact: Fernand Grulms
59 boulevard Royal • BP13 L-2010 Luxembourg
Tel.: (+352) 46 36 60-1 • Fax: (+352) 46 09 21
mail@abbl.lu • www.abbl.lu • www.lff.lu