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10/19/2006

Compliance officers and auditors in the Luxembourg fund industry

The ALFI (Association Luxembourgeoise des Fonds d’Investissement) is the official representative body for the Luxembourg investment fund industry and was set up in November 1988 to promote its development. It published récently a brochure in French about careers in the investment funds.

It is interesting to observe the expected profiles for the compliance officers and internal auditors positions.

The qualities for the internal auditor are the following:
University diploma in economic and financial sciences or of accountancy
Open to acquire specific qualifications
Bilingual, even trilingual
Ambitious, motivated
Team spirit
Excellent relational capacities


The qualities for the compliance officer are the following:
Economic, legal or regulatory university diploma, ideally supplemented by one 3rd financial cycle high Level of professional competence in the field of banking and financial and the applicable standards
Good knowledge of the financial markets
Perfect knowledge of the general regulation and OPC industry.
Bilingual/trilingual English/French/German


It is striking that the keyword for the functions is missing in this official brochure supported at the govermental level: independence (or independent).

This is the critical quality for such jobs.

On the other hand, a quality like "Ambitious" poses a major problem: it appears incompatible with the job which precisely must take the risk if necessary to be opposed even if it means to bring into play the position : an ambitious guy will not oppose his management all the more that management in Luxembourg consider officially vague and ambiguous offences such as forgery, use of forgery, false balance sheet, use of false balance sheet or unauthorised use of corporate property (See ABBL report in 2003 )

In a nutshell, these functions are "formatted" in Luxembourg so that they do not disturb too much by focusing on the languages and the legal and regulatory standards (that anyway are regularly changing ). But independence is not sought.

08:35 Posted in Luxembourg | Permalink | Comments (0)

09/29/2006

Specific training course in compliance

As of September 20, 2006, the Association of Luxembourg Compliance Officers for the Financial Sector (ALCO) and the Luxembourg Institute for Training in Banking (IFBL) signed a partnership agreement to the purpose of providing a specific training course dedicated to the job of Compliance Officer, under its various aspects.
At the end of the course which will be delivered by ALCO board members among others, a certificate will be issued to attest the achieved qualification.
For several years, the fight against money laundering and the financing of terrorism have been an important part of the financial sector’s environment. This evolution has seen the emergence of a new profession: the Compliance Officer. Its role is to ensure the respect of legislative, statutory and ethical standards in effect.

The training is positive trend but there are a couple of issues that relativize its effect :
- first, due to link of subordination inherent to any contract of employment, how compliance officers may deal with management that officially minimized and standardized accounting frauds in the debate that took place for the transposition of the second directive (See "Clear and pragmatic legal rules") ?
- second, taking into account the low level of sanctions (number and amount of fines) in Luxembourg compared to competitors (See article "CSS poor communication on sanctions"), what is the credibility of the compliance framework of the financial center ?
- finally, beyond the knowledge of the legal and regulatory framework that may be learnt during a traditional training, what about the individual ethical decision making process and ethical behavior, actually the most important ?

Compliance is much more a question of state of mind than a question of training. This implies a specific coaching/training at every level of the organisation to monitor a cultural change. Such coaching can only be provided by people that have hindsight and therefore are able to repudiate the visible dysfunctions of the financial center.


Press release
See Brochure

06:08 Posted in Luxembourg | Permalink | Comments (0)

09/27/2006

CSSF poor communication on sanctions

The CSSF in Luxembourg has a poor communication relating to fines. The only source of public information is the annual reports.
Furthermore, when looking the annual reports since 2002 we may see that the number and the amount of fines is not credible compared to those of the FSA (See article “FSA transparence on sanctions").
In 2002, in two cases fines of EUR 8,000 each were imposed on account of transmission of information that proved to be incorrect; in two other cases, EUR 1,500 fines were imposed because the managers did not communicate the required information by the CSSF. The CSSF also imposed disciplinary fines of EUR 1,500 each on persons responsible for the daily management of two PFS on account of refusal to transmit information as required by CSSF Circular 01/40 on professional obligations of financial professionals within the scope of the fight against money laundering and the circular letter of 19 December 2001 on the same matter. The CSSF imposed EUR 495.78 disciplinary fine on each of the three persons responsible of a SICAV for their refusal to communicate the management letter. In 2002, the CSSF imposed disciplinary fines of EUR 12,500 on each of the managers of a financial intermediary. These fines were imposed on the one hand because of communication
of incomplete, incorrect, and, in certain cases, even false information, and on the other hand on the account of non-compliance with provisions relating to internal organisation, rules concerning stock exchanges and rules of conduct.
In 2003, the CSSF required the departure of six managers and directors : in two cases, the legislation concerning money laundering was seriously infringed; the other cases concerned unprofessional and deontological incorrect behaviour relating to the granting of a credit which resulted in a loss for the bank. The CSSF imposed disciplinary fines of EUR 1,500 each on persons responsible for the daily management of three PFS on account of refusal to transmit information relating to the closing of previous financial years.
In 2004, the CSSF required the resignation of two managers: in one case, the legislation governing money laundering was seriously infringed; the other case was about unprofessional and deontologically incorrect behaviour with relation to a client. The CSSF also imposed disciplinary fines of EUR 1,500 each on persons responsible for the daily management of four PFS on account of refusal to transmit information relating to the closing of previous financial years
In 2005, the CSSF did not fine any professional.

Compared to the FSA in the United Kingdom, except for year 2002 probably due to the "11 September effect", the number and the amounts are not dissuasive enough to prevent improper business conduct all the more as there is no communication on the issues. One must keep in mind that 14% of the total Offshore assets are in the United Kingdom compared to 16% in Luxembourg and 28% in Switzerland (Source : Merrill Lynch, Capgemini, Vontobel Equity Research, quoted by Le Temps, 14 Septembre 2005)). Therefore One should expect the same level of sanctions.

Furthermore the requirement for proper business conduct is not implemented as it should be compared to what is done by the Swiss Federal Banking Commission in Switzerland (See article “Proper conduct : Luxembourg v. Switzerland” )


CSSF Reports

See abstract of the report 2002
See abstract of the report 2003
See abstract of the report 2004
See abstract of the report 2005

16:00 Posted in Luxembourg | Permalink | Comments (0)