Ethics and governance in the European Financial centers

Nearly two-thirds of senior executives around the world say they have experienced some form of actual or
attempted corruption in their business dealings, according to a report by PricewaterhouseCoopers. The report, 'Confronting Corruption: The business case for an effective anti-corruption programme,' finds that almost 80 percent of executives say they have anti-corruption programs in place at their company, but only 22 percent are confident the programs are effective. Executives say they feel vulnerable to corruption particularly when doing business in expanding markets such as China, India, Russia and South America.

PwC has no corruption contact for Switzerland and Luxembourg, two major financial centers.

But the situation is more worying in Luxembourg than it is Switzerland as
- there is a Transparency International chapter in Switzerland, which is not the case in Luxembourg
- according to the Global Corruption Barometer 2007 issued by Transparency International, 6 % of respondents in Luxembourg reported they paid a bribe to obtain a service. To be compared to 1 % of respondents in France or Switzerland, 2 % in the UK or in the Netherlands and 5% European average. Luxembourg is in the third quintile (6 – 18%) with countries like Bulgaria, Croatia, Czech Republic, Malaysia, Panama, Russia, Turkey, Venezuela, and Vietnam,
- OECD has recently urged Luxembourg to introduce liability of legal persons when at the same time the GRECO took a particularly positive view of the seizure and confiscation system and of criminal liability on the part of legal persons. Neither GRECO report, nor OECD reports relating to corruption seem officially communicated in Luxembourg when other non sensitive reports from the OECD are communicated (for instance the Economic survey of Luxembourg).


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The Guardian has reported that this year, Gurria, head of the Organisation for Economic Co-operation and Development, made strong public statements about the failure of certain tax havens to disclose information to governments about suspected tax evaders. 'The question is the capacity of countries and third parties to make sure the origin and destination of the money is legitimate, not the product of an illegal activity ... I'm talking about taxes. That is bad, but almost tame compared to money laundering and organised crime trying to pass their money through legitimate accounts and systems.'
There is actually concern that the OECD is failing to come to grips with tax evasion. Scandals centring on Liechtenstein's biggest bank, owned by the head of state, and UBS bankers in the US have ratcheted up fears that tax havens are incapable of monitoring the battalions of accountants, lawyers and bankers stashing trillions of dollars away from national exchequers.

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G8 Leaders have committed to take steps to ensure that the global financial markets implement the highest international transparency standards and other measures to protect against criminal abuse. With ample evidence that the system is misused for corrupt purposes, the G8 must intensify efforts to promote greater transparency in cross border capital flows and to better coordinate controls to deter and detect the illicit transfer of funds through the global financial system.

Dishonest people and companies may still make money through tax havens.

G8 governments should accelerate implementation of their commitments to fighting financial crimes and money laundering and to ensure transparency in onshore and offshore centres by taking the following actions:
• Make tax evasion through offshore accounts a predicate criminal offence under relevant anti-money laundering law and make every effort to expose and prosecute such crimes;
• Promote international coordination to deter such crimes and to make the placement of illicitly obtained proceeds in offshore bank accounts as risky as possible;
• Call on the IMF, FATF and other international governmental organisations to publish information and assessments of countries’ compliance with antimoney laundering and transparency standards and require financial
institutions to take that information into account;
• Adopt stronger transparency rules for the global financial markets that effectively prevent the abuse of legal schemes (such as trusts, company services and foundations) for purposes of hiding illicit transfers of funds
across borders while still protecting legitimate concerns about privacy;
• Coordinate regulations to ensure that international accounting standards require disclosure of special purpose vehicles and other off book entities and annual reports of multinationals identify and justify strategies for transactions involving offshore centres; and
• Require greater transparency of asset-backed securities to prevent fraud; adopt and fully apply FATF anti-money-laundering requirements; and increase transparency of entities or funds (including hedge funds).

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