Ethics and governance in the European Financial centers

Money laundering and terrorist financing: Commission adopts 'level 2' implementing measures to Third Directive. The European Commission has adopted last week (3 August) technical measures implementing the Third Directive on the prevention of money laundering and terrorist financing. The Directive was adopted in October 2005 (IP/05/682) and is to be implemented at the latest in December 2007. These technical measures were previously endorsed under the comitology procedure by the Committee for the Prevention of Money Laundering and Terrorist Financing (IP/06/605) - a regulatory committee composed of Member States and chaired by the European Commission - and by the European Parliament. The measures are based on extensive stakeholder consultation and address the following:
(a) a definition of what should be understood by the term 'Politically Exposed Person';
(b) technical criteria allowing the extension of situations in which the procedures for customer due diligence may be simplified; and
(c) technical criteria allowing Member States to exclude from the scope of the application of the Directive those persons/entities conducting financial activities on an occasional or very limited basis.

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The Council of Europe’s anti-corruption monitoring mechanism, the Group of States against Corruption (GRECO) has published three weeks ago its Second Round Evaluation Report on Cyprus. The report has been made public with the agreement of the Cypriot authorities.

GRECO’s Second Evaluation Round focuses on measures taken to recover the proceeds of corruption, to prevent and combat corruption in public administration and to prevent companies being used to shield corruption.

GRECO addresses a series of recommendations to Cyprus tailored to improve its capacity to combat corruption. They deal, inter alia, with police specialisation in the use of confiscation and interim measures regarding corruption proceeds, citizen’s access to information held by public authorities, the mandate of the Commissioner for Administration (Ombudsman), conflicts of interest in situations where public officials move to the private sector and sanctions applicable to legal persons convicted of corruption offences.

Measures taken by Cyprus to implement the recommendations will be assessed by GRECO in the context of a specific compliance procedure, towards the beginning of 2008.

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Centre for the Study of Financial Innovation (CSFI) has recently completed its 11th Banana Skins survey of leading members of the finance industry to find out their concerns about the soundness of the financial markets.

The survey, sponsored by PricewaterhouseCoopers, puts together a league table identifying potential sources of risks to banks and ranks them by severity. This year’s survey is based on a record 468 responses in 60 countries.

The poll of top financial practitioners, regulators and analysts is dominated by the concerns around over-regulation for the second year running. Fast-rising risks this year also include concerns about commodities, interest rates, emerging markets and equity markets.

As far as over-regulation is concerned, may be this is due to the lack of responsibility of some bankers when writing officially about the AML draft law in their country : "offences such as forgery, use of forgery, false balance sheets, use of false balance sheets or unauthorised use of corporate property should not be included. These are offences with financial connotations which are confused with laundering for the sole purpose of applying exceptional powers to these vague offences.".

After cases like Enron, Worldcom..., nobody may seriously consider use of forgery, false balance sheets, use of false balance sheets or unauthorised use of corporate property as "vague offences" and therefore as usual business behaviour.

Such wording unfortunately supports officially bad management and bad governance in this country depite a communication on proper business conduct.


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