Ethics and governance in the European Financial centers

The Permanent Subcommittee on Investigations scheduled a hearing last August 1, 2006, entitled Offshore Abuses: The Enablers, The Tools & Offshore Secrecy. The Subcommittee had held a number of hearings addressing the issue of tax havens and offshore abuses which are undermining the integrity of the federal tax system, diverting tens of billions of dollars each year from the U.S. Treasury, and undermining U.S. law enforcement. Hearings held in 2001 had examined the historic and ongoing lack of cooperation by some offshore tax havens with international tax enforcement efforts and their resistance to divulging information needed to detect, stop and prosecute U.S. tax evasion. A hearing held in December 2002 and Report issued in January 2003 had provided an in-depth examination of an abusive tax shelter used by Enron. Two days of hearings in November 2003, and a bipartisan report issued in 2005, had provided an inside look at how some respected accounting firms, banks, investment advisors, and lawyers have become engines pushing the design, sale, and implementation of abusive tax shelters to corporations and individuals across the country.
The Subcommittee’s upcoming August 1st hearings presented case histories on the use of offshore trusts and corporations to circumvent U.S. tax, securities and anti-money laundering laws. Witnesses for the upcoming hearing were securities firms, banks, law firms, U.S. taxpayers, a trust protector, and tax and securities experts.


Statement of Senator Norm Coleman (abstract):

"Today’s hearing continues this effort by examining the extent to which U.S. individuals are abusing
offshore jurisdictions to circumvent compliance with U.S. tax, securities, and anti-money laundering laws. (...) While these jurisdictions claim to offer limited financial disclosures, light regulation, enhanced asset protection, and financial privacy, in reality they have become the Wild West of the financial world, havens for fraud and evasion"

Statement of Senator Carl Levin (abstract):

"The key features of offshore tax havens are low or no taxes and a legal system that favors secrecy over transparency. Tax havens sell secrecy to attract business. And they are very successful. About 50 tax havens operate in the world today. Those tax havens have, in effect, declared war on honest U.S. taxpayers, by giving tax dodgers the means to avoid their tax bills and leave them for others to pay. These schemes are shrouded in the secrecy of tax havens because they can’t stand the light of day. Trusts and shell corporations established in offshore secrecy jurisdictions operate in a legal black box that allows them to hide assets, mask who controls them, and obscure how their assets are used. An armada of “offshore service providers,” lawyers, bankers, brokers, and others then joins forces to exploit the black box secrecy and help clients skirt U.S. tax, securities, and anti-money laundering laws"

As far as European financial centers are concerned, only the Isle of Man, Gibraltar, the British Virgin Islands, the Cayman Islands and Switzerland are quoted in the framework of the report. It would be interesting for American Senators to investigate the other financial centers : Jersey, Cyprius, Liechtenstein, Monaco and Luxembourg.

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Detail of the hearing

Download Report

View the hearing (real player)

A whistleblower is an employee, former employee, or member of an organization who reports misconduct to people or entities that have the power to take corrective action. Generally the misconduct is a violation of law, rule, regulation and/or a direct threat to public interest: fraud, health, safety violations, and corruption are just a few examples.

Whistleblowing is based on internal information that is communicated and therefore is clearly a breach of the loyalty.

The use of official and public information to raise risks is not whistleblowing as everyone with public-spiriteness may have legally access and state comments on such information that is the visible part of the iceberg. This is the reason why inaction is not acceptable and decision-makers that do not take corrective action should be dismissed.

The procedure, that is not in the European culture, is required for companies that must comply with the Section 301 (4) of the Sarbanes-Oxley Act on corporate governance i.e. companies that require their financial records and statements to be certified by the US stock exchange.

See the Opinion 1/2006 on the application of EU data protection rules to internal whistleblowing schemes in the fields of accounting, internal accounting controls, auditing matters, fight against bribery, banking and financial crime (European source)

The IBA (International Bar Association) has an International Anti-Money Laundering Forum. This is an internet-based network assisting lawyers in dealing with their current responsibilities in connection with new anti-money laundering legislation.
It has launched an online forum for users of this website to discuss the practicalities of complying with new anti-money laundering legislation around the world.
The information relating to countries is up to date.
Go to the website