Ethics and governance in the European Financial centers

Every year, U.S. officials from agencies with anti-money laundering responsibilities meet to assess the money laundering situations in 200 jurisdictions. The review includes an assessment of the significance of financial transactions in the country’s financial institutions that involve proceeds of serious crime, steps taken or not taken to address financial crime and money laundering, each jurisdiction’s vulnerability to money laundering, the conformance of its laws and policies to international standards, the effectiveness with which the government has acted, and the government’s political will to take needed actions.

The Bureau for International Narcotics and Law Enforcement Affairs publishes a table. It assessed the actions by government :



As far as Luxembourg is concerned, the financial center has a correct legal and regulatory framework. The only weakness is the international transportation of currency : there are no law or regulation allowing the jurisdiction, in cooperation with banks to control or monitor the flow of currency and monetary instruments crossing its borders. Of critical weight here are the presence or absence of wire transfer regulations and use of reports completed by each person transiting the jurisdiction and reports of monetary instrument transmitters.

The last paragraph of the detailed report is : "The Government of Luxembourg has enacted laws and adopted practices that help to prevent the abuse of its bank secrecy laws, and has enacted a comprehensive legal and supervisory anti-money laundering regime. However, further action should be taken to address issues such as the lack of a distinct legal framework for the Financial Intelligence Unit and the small number of money laundering investigations and prosecutions. The Financial Intelligence Unit should work with regulatory agencies to formulate and issue substantive guidance to financial institutions on anti-money laundering trends and techniques. Luxembourg should continue to strengthen enforcement to prevent abuse of its financial sector, and should continue its active participation in international fora. Luxembourg should enact legislative amendments to address the continued use of bearer shares and the lack of crossborder currency reporting requirements."

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

The globalisation of the world economy has led to a close linking of the financial markets and to liberalization of international financial flows. As globally oriented financial centers, these countries have a vital interest in the worldwide enforcement of internationally recognized standards to prevent abuse of the financial markets.

According to reports by members from the French parliament between 1999 and 2002, all these country offered a safe haven for terrorist money and money launderer, and their respective authorities were doing nothing about it. The respective authorities said the report relating to their Financial center was out of date, and anyway there were some progress since the release of the reports.

The blog will not be based on the findings of the French MPs’ reports, but on facts that can be observed on public/official sources to assess the life of law and regulation that are said to be implemented : in other words, standards may not be in force and effect, there may not be a full and proper implementation of all necessary measures and the system in place may not be effective.

The more a Financial centre communicate that self policing is working and that the integrity and ethics are abide by, the stricter will be the conclusions on what is obviously actually going on that do not comply with the statements.