Ethics and governance in the European Financial centers

Early July Minister Luc Friden was asked a parliamentary question about the draft text against tax havens that was released by American senators from both sides of the Senate.
In his answer dated 24 July Luc Friden states that the draft text does not reflect the policy of the US Government and that the fact that Luxembourg is quoted in the draft law does not comply with the positive assessment on the cooperation that is expressed by the American authorities.

Unfortunately his view does not reflect the reality:

According to the International Narcotics Control Strategy Report 2006, "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 and counterterrorism financing regime. 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. It should ratify the UN Convention against Transnational Organized Crime."

According to the Narcotics Control Strategy Report 2007, "The Government of Luxembourg has enacted laws and adopted practices that help to prevent the abuse of its bank secrecy laws, and it has enacted a comprehensive legal and supervisory anti-money laundering regime. However, further action should be taken to address the lack of a distinct legal framework for the financial intelligence unit. The financial intelligence unit staff should have its other judicial responsibilities curtailed and be freed to focus solely on financial crimes. Regarding regulations, Luxembourg should continue to strengthen enforcement to prevent abuse of its financial sector. Specifically, Luxembourg should pass legislation creating the authority for it to independently designate those who finance terrorism. Luxembourg should also enact legislation to address the continued use of bearer shares. Per FATF Special Recommendation Nine, Luxembourg should initiate and enforce cross-border currency reporting requirements and the data should be shared with the financial intelligence unit. Luxembourg's anti-money laundering regime may be relying too heavily on the filing of suspicious transaction reports to generate investigations. Although Luxembourg has steadily enacted anti-money laundering and terrorist finance laws, policies, and procedures, the lack of prosecutions and convictions is telling, particularly for a country that boasts such a large financial sector."

The evolution of the wording is significant especially the two last sentences in the 2007 report.

Luxembourg is unfortunately loosing the credibility because of:
- inertias
- lack of sanctions compared to other financial centers,
- silence on issues and no will to tighten up the ship due to conflicts of interests (some would say corruption) because of the small size : everybody knows everyone.

SUch attitude is not acceptable for the American authories and in the United States, where there is a tradition of investigation either by the Congress or the media.

See country report 2006
See country report 2007
See parliamentary question (in French)
See answer (in French)

Laurent Mosar, who is member of the Parliament in Luxembourg, has this week asked a question to the government in Luxembourg about the project of Stop Tax Haven Abuse Act.
Laurent Mosar asked actually two questions :
1. what is the attitude of the government in front of the draft law ?
2. What necessary steps are planed to protect the interests of the financial center ?

The second question is the wrong one. The relevant question should have been "What is to be done to correct the dysfunctions which definitely harm the reputation of the financial center ?"

Once more dysfunctions are denied and what counts is to make money in this center.

See question (French)

The Forensic & AML department was this week appointed Center Deloitte Luxembourg vient d’être nommé Centre of Excellence in the Deloitte network worldwidse. There are five Centers like this to provide support and services in their area.


See press release (in french)