Ethics and governance in the European Financial centers

The Financial Services Authority (FSA) fined UBS AG (UBS) £8million for systems and controls failures that enabled four employees to carry out unauthorised transactions involving customer money on at least 39 accounts. The £8m fine is the third largest the FSA has ever imposed.

The FSA investigation found that UBS had failed to:

• manage and control the key risks, and the level of risk, created by its international wealth management business model;
• implement effective remedial measures in response to several warning signs that suggested the business' systems and controls were inadequate; and
• provide an appropriate level of supervision over customer-facing employees.

By the way, what was the pragmatic solution for UBS in Luxembourg in the context of the Madoff affair, with issues similar to the ones that are fined by FSA (poor execution of the due diligence obligation, failure of human and technical means and of internal rules) ?

Let's read again a press release from CSSF and the happy end in another press release:

On 25 February 2009 the Commission de Surveillance du Secteur Financier (the "CSSF") ordered UBS (Luxembourg) SA ("UBSL") to implement, within a period of three months, the necessary infrastructure, i.e. sufficient human and technical means and the necessary internal rules in order to fulfil all the tasks relating to its function of depositary bank of a Luxembourg UCI in accordance with the Law of 20 December 2002 on undertakings for collective investment, as amended, and Circular IML 91/75, and to provide evidence and guarantees thereof.

After several updates of a draft, UBSL submitted to the CSSF by post dated 25 May 2009 a final detailed report regarding improvements made to its infrastructure and substantial amendments to its internal procedures relating to the function of depositary bank. After analysing said report, the CSSF is of the opinion that UBSL has now delivered evidence and guarantees of having the necessary infrastructure and the necessary rules for its internal organization in place, in line with the injunction imposed on it and in compliance with professional standards applicable in the Grand Duchy of Luxembourg.

 

 

 

 

If bankers and politicians (that are their servants) in Luxembourg denies TJN's findings, in the UK, David Taylor, Member of Parliament for North-West Leicestershire, asked:

"The Tax Justice Network has done the world a great service in producing its global index of secrecy, which reveals the most secretive financial centres—the City of London being the fifth worst. Why cannot we take an international lead in tackling tax avoidance by first ending the clandestine and corrupting culture that permeates the City of London?"

On 5 October 2009, the Group of States against Corruption (GRECO) celebrated its 10th Anniversary with a High-level Conference which brought together a large number of Ministers and Secretaries of State as well as representatives from its 46 member States, several non-member States, international organisations and civil society.

 

Numerous speakers highlighted the need for enhanced cooperation among all international stakeholders in the fight against corruption with a view to avoiding duplication and promoting synergies.

 

Files including videos about the event are available there.

 

It is interesting to analyse the national delegations. There is a kind of clue about the involvement of the jurisdiction in the fight against corruption.

 

MONACO (2.02 Km2)

 

M. Philippe NARMINO, President du Conseil d’Etat, Directeur des Services Judiciaires, Direction des Services Judiciaires, Palais de Justice

Mme Claudette GASTAUD, Ambassadeur Extraordinaire et Plenipotentiaire, Representante Permanente, Representation Permanente de Monaco aupres du Conseil de l’Europe

M. Andre MUHLBERGER, Directeur de la Surete publique, Direction de la Surete publique

M. Thierry PERRIQUET, Conseiller pres la Cour d’Appel, Palais de Justice

M. Frederic PARDO, Secretaire des Relations Exterieures, Direction des Affaires Internationales, Departement des Relations exterieures, Ministere d'Etat

M. Frederic COTTALORDA, Chef de Section, Service d’Information et de Controle sur les Circuits Financiers (SICCFIN)

 

LUXEMBOURG (2586 Km2)

 

M. Jean BOUR (Chef de délégation au GRECO), Procureur d’Etat, Parquet du Tribunal d’Arrondissement de Diekirch

 

 

 

Comment:

 

Noone from the Corruption Prevention Committee (« COPRECO ») in Luxembourg. As explained, COPRECO is an interministerial body responsible in particular for preparing and proposing to the Government measures to combat corruption and for co-ordinating within the public administration the enforcement of any measures adopted.

 

Criminal liability of legal persons is not enforced in Luxembourg despide an injunction last year and a new one this year:

- "OECD urges Luxembourg to introduce liability of legal persons for foreign bribery" (OECD Working Group on Bribery, 27 March 2008)

- "Toutefois, force est de constater que plus de deux ans se sont écoulés depuis le dépôt du projet de loi, sans que celui-ci n’ait encore franchi une étape décisive dans la procédure  parlementaire. Le Groupe de travail de l’OCDE sur la corruption reste donc sérieusement préoccupé par l’absence de responsabilité des personnes morales en droit luxembourgeois, dix ans après l’entrée en vigueur de la Convention sur la lutte contre la corruption d’agents publics étrangers dans les transactions commerciales internationales. Cette situation constitue un manquement grave et continu aux obligations du Luxembourg par rapport à la Convention." (Mark Pieth-OECD Working Group on Bribery, 22 July 2009)