Ethics and governance in the European Financial centers

US demands names of UBS customers

2008-07-04T15:02:32+02:00

The Times and other media have reported that a federal court took the unprecedented step of demanding that the Swiss bank hand over the names of as many as 20,000 of its customers

The US law requires a US taxpayer to report all financial accounts in a foreign country if the total value of the accounts exceeds $10,000. Failure to report a foreign account can lead to a penalty of up to 50 per cent of the amount in the account at the time of the violation.This is the first time that the US courts have authorised such a request over a foreign bank and the move could put it on a collision course with the authorities in Switzerland, where it is illegal for banks to disclose confidential information without client approval because of the banking secrecy.

In a statement, the bank said: “UBS takes this matter very seriously and is working diligently with both Swiss and US government authorities, consistent with Swiss law and the legal frameworks for intergovernmental cooperation and assistance.”

Transparency International call G8 to monitor abuse through tax havens

2008-07-04T05:54:03+02:00

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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People risk in Luxembourg

2008-07-03T08:38:43+02:00

An interesting conference took place in Luxembourg a few days ago.

It was organised by PRiM (the association of Risk Management Professionals in Luxembourg) in association with POG (the Personnel Officers' Group) and Hudson on a topic which is becoming of increasing importance : People Risk.

Unfortunately the critical point of the topic for Luxembourg was not on the agenda : why dishonest professionals in Luxembourg are knowingly hired and supported when ethical professionals are fired or repudiated in the recruitment process ?

This support of dishonest professionals was underlined by the CSSF in its annual report 2004 and is unfortunately still verified on the field in crossed public and official sources (judiciary and corporate registration) that are the visible part of the iceberg .

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US wins court order for UBS bank records

2008-07-02T20:53:15+02:00

Swissinfo has repôrted that a Miami judge has authorised United States officials to seek information from Switzerland's largest bank, UBS, on taxpayers suspected of evading income taxes.

Some observers see the decision as putting further pressure on Switzerland's traditional banking secrecy laws

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Liechtenstein moves to end EU tax fraud row

2008-07-02T11:32:13+02:00

The AFP has reported that Liechtenstein has pledged to boost cooperation with the EU in an effort to avoid future problems.

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Close cooperation v. close complicity

2008-06-22T16:37:10+02:00

" Small countries survive as financial centres because they are more agile, because they can act more quickly, and because there is this close cooperation between the actors." , Lucien Thiel said at the “Panel discussion: How can privacy survive in an environment of increasing information exchange?”, in the framework of the Liechtenstein Dialogue that took place in 2007.

Lucien Thiel is the best representative of the Luxembourg financial center as Member of the Luxembourg Parliament (same party as the Prime Minister) and Former General Manager, Luxembourg Bankers’ Association (ABBL). And what is says definitely express the deep business culture of the Luxembourg financial Center.

After the Liechtenstein scandal early this year he is the one who said that "It is not our duty to control if the tax payer was honest" and "Banking secrecy remains: Luxembourg is not compelled to communicate its clients' data".

In the framework of the transposition of the Second European Directive relating to AML it is the Luxembourg Bankers’ Association (ABBL) he chaired that wrote in an annual report that "offences such as forgery, use of forgery, false balance sheet, use of false balance sheet or unauthorised use of corporate property are vague and ambiguous" (ABBL, Annual Report 2003, page 22).

Knowing the business stake of audits with a commercial relationship between auditors and auditees, and that audit firms, and especially every big four firm, are members of the ABBL this means that in Luxembourg auditors consider that offences such as forgery, use of forgery, false balance sheet, use of false balance sheet or unauthorised use of corporate property are vague and ambiguous as they did not repudiate the statement. Furthermore there are very little declarations of suspicion from auditors in Luxembourg as observed the Annual Report 2007 from the Minister of Justice: only 4 declarations of suspicion for a profession that has 350 professionals plus 280 trainees. Such figure is not realistic all the more than a declaration of suspicion means the loss of the client and of prospects (how can they rely on an auditor that is not pragmatic enough?) in a country where there is a business model for growth from the audit leader that do not care of the IFAC warning about that culture.

We are no longer talking about banking secrecy or tax advantages. As I already wrote it is a mistake to focus on these.

We are talking about what was called "this close cooperation between the actors" at the Liechtenstein Dialogue 2007. But this "close cooperation" unfortunately appears much more like complicity to act quickly to hide dysfunctions and hush up issues: complicity for the “reason of business”.

Outcomes of the Liechtenstein Dialogue 2007

Swiss banks agreed settlement pay-outs to Parmalat

2008-06-22T07:25:13+02:00

Il was reported that Swiss banks UBS and Credit Suisse agreed settlement pay-outs to Parmalat.
The Parmalat collapse five years ago was one of Europe's biggest financial scandals: more than 14 billion euros went missing from the group's accounts, wiping out the savings of around 135,000 people in Italy.

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Former UBS Banker Pleads Guilty in Tax Evasion

2008-06-22T07:12:59+02:00

Several media have reported that a former UBS Banker Pleads Guilty in Tax Evasion.

Read press release from the Depaertment of Justice

Read New York Times
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Read The Telegraph
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Money laundering and terrorist financing through the real estate sector

2008-06-14T11:28:31+02:00

The FATF recently issues its typologies report on the real estate sector. This first FATF in-depth study of the sector examines its vulnerabilities to misuse for money laundering and terrorist financing.

The FATF provides an interesting list of red flags (pages 34-37). Unfortunately these experts do not take into consideration red flags relating to the management or the audit firm of a real estate company, that are visible especially in Luxembourg the small country where everydoby knows everyone and that is self regulated:

- Knowingly appointing a dishonest managing director (recent judiciary sources) that definitely do not comply with the requirement of professional standing,
- having a "commissaire" (auditor) that is neither member of the charered accountants nor of the chartered auditors : in Luxembourg anyone may be auditor.
- having a "commissaire" that is audited by an auditor in a far tax haven (for instance a company located in Luxembourg audited by a company located in the BVI...)
- ...

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GRECO report on Switzerland

2008-06-14T11:05:56+02:00

The Council of Europe’s Group of States against Corruption (GRECO) has published recently its Joint First and Second Round Evaluation Report on Switzerland (link to the report). The report is made public with the agreement of the country’s authorities.
GRECO has issued 13 recommendations, in total, to Switzerland in the above-mentioned areas. Measures taken to implement these recommendations will be addressed by GRECO in the context of a specific compliance procedure in the second half of 2009.

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