Ethics and governance in the European Financial centers

In the report 2004, the CSSF wrote that "In 2004, the CSSF dealt with a total of 509 communications related to the fight against money laundering and terrorist financing.It is interesting to note that 91 of these reports were made following the request of potential clientsto enter into business relations, but to which the professional of the financial sector did not respond favourably due to a suspicion of money laundering or terrorist financing. In this context, it must be stressed that often, either the professional refused to establish business relations for lack of transparent and conclusive information, or even because the documents seemed to be fraudulent or forgeries, or the clients withdrew following the professional’s request for further documents and information. It is obvious that thorough screening measures right from the outset prevent the professional from having to deal with risk clients he had better refused from the beginning. Many reports (44) were also made within the context of combating terrorist financing. This category comprises the communications that have either been transmitted to the CSSF as copies following the circulars issued by the Luxembourg Financial Intelligence Unit (FIU), or following the CSSF circulars on financial restrictive measures (freeze of funds) decided at European level. It can be observed that 86 out of the 162 credit institutions registered on the official list as at 31 December 2004 made a communication in 2004. As far as the other professionals of the financial sector (PFS) are concerned, 18 out of the 166 PFS registered on the official list as at 31 December 2004 transmitted a communication to the CSSF. It is striking that the communications of the ten professionals of the financial sector that made more than ten communications each in 2004 – i.e. ten credit institutions – make up alone half of the communications received by the CSSF in 2004 (46%). The reason why some professionals of the financial sector make a large number of reports while
others only a few, even none, can be linked to the activity and the size of the professional, as well as to the number of clients. However, although reports should not be made rashly without the professional having observed a fact that might be an indication of money laundering or terrorist financing in accordance with article 5 paragraph (1) of the law, it is important that the professionals of the financial sector, including in particular PFS, that have not reported any suspicion, or very few, reflect on this situation."

Declarations_of_suspicion_LU.pdf

There is no improvement in 2005. It is said in the report that "in 2005, the CSSF dealt with a total of 487 communications relating to the fight against money laundering and terrorist financing, which is a slight decrease as compared to 2004 (514 communications) (...) It should be stressed that the professionals that have filed more that ten reports – i.e. twelve banks and one PFS – have become even more diligent as in 2004, as the communications of these professionals represent more than half of the total number of communications received by the CSSF (about 61% in 2005 against 46% in 2004)".

Declarations_of_suspicion_2_LU.pdf



These figures mean actually that only a few professionals are active in AML. Most of them do not care about it, which is probably due to the pragmatic approach to the existing clear law and regulation.

When looking at the governmental website, it is stated in a pages called " The fight against money-laundering " that the Principality is fully aware of the necessity of combating this. The following stats are given : the progression in the number of declarations of suspicion recorded by SICCFIN, have increased from 58 in 1999 to 34 for just the first 4 months of the year 2000, engendering numerous requests for investigation, in addition to the exchange of information with TRACFIN and other foreign organisations.

The increase took place at the time of the visit of the French MPs. No more recent stats are unfortunately provided on the website. Nevertheless the SICCFIN report 2004 is available with recent stats :
- 2000 : 210
- 2001 : 307
- 2002 : 275
- 2003 : 254
- 2004 : 341

Rapport_MC_fr.2.pdf

The ABBL commissioned a stydy by the TNS ILRES Institute. Findings were presented July 4th.

TNS ILRES identified four categories of employees :
- "Critics"are rather critical, therefore difficult to lead. They have a strong belief in the competitive ability of the company. They are individualistic, interested in their own professional advancement. They give impetus for change. They are ready to change jobs when the opportunity arises.
- "Drivers" have a strong identification with corporate objectives. They are highly loyal to the company. They believe in the future vision and the competitive ability of the company. They show strong initiative and willingness to cooperate inspires and motivates colleagues.
- "Residents" are very satisfied. They fulfil their work without experiencing a motivating environment. They have a stabilising effect on the company. They are security driven. They need to be directed.
- "Detached" are dissatisfied. They are disconnected from the company. They are more frustrated than dedicated and a source of contagion for negative climate. They are underutilised resources of the company.

Compared to the European benchmark, the financial centre of Luxembourg is intensely missing ‘drivers – locomotives’ (only 8% have a reference value of 21%) as well as ‘critics’ (only 4% have a reference value of 13%); instead of having 1 employee out of 3 who are motivated and convinced of the performance of the centre, the survey reveals that there is only 1 in 8.

The analysed population characterises itself with a very high proportion of ‘residents’, 56% which means 22 points more than the European average of the employees, this is not only surprising but also worrying for a sector which is of first importance to the national economy. The proportion of ‘detached’ (one third) matches the European average.

Newsletter_ABBL_Social_Matters_1_ENG.pdf



As far as business ethics is concerned, Jean-Nicolas Schaus, who is General Manager of the CSSF, (body responsible for the supervision of the Financial centre) stated in the report 2004 that "in too many cases, the persons responsible for reprehensible acts do not suffer the consequences with regard to the continuation of their occupation. The person responsible for such an act is often simply removed from management while being granted compensations, which largely exceed normal expectations. Sometimes, the impression could arise that crime pays, whichsoils the reputation of a fi nancial centre. Moreover, it can be observed on too many occasions that when such professionals seek new employment, the new employers tend to somewhat close their eyes to the problem, while knowingly taking the risk that the persons concerned could again perform reprehensible acts".
It is interesting to underline that for the General Manager of the body responsible for the the supervision of Luxembourg Financial centre there may be an acceptance of employees that are not honest in a certain limit ("in too many cases"). Otherwise the wording whould have been "in some cases" or "in many cases". This is probably a sign of the pragmatism in Luxembourg.

CSSF_abstract_annual_report_2004.pdf




This means that the average employee in Luxembourg is either a sheep or a dubious guy.