Ethics and governance in the European Financial centers

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)

 

 

 

 

 

 

Le secret bancaire helvétique existera tant que les Suisses le soutiendront. Ce qui est différent, c’est qu’il ne sera plus possible de se réfugier derrière le secret bancaire pour les activités réalisées avec la clientèle à l’étranger. On ne pourra plus faciliter l’évasion fiscale en s’appuyant sur le secret bancaire. (free translation : The Swiss bank secrecy will exist as long as the Swiss will support it. What is different, is that it will not be possible anymore to take refuge behind banking secrecy for the activities carried out with foreign clients. One will not be able to facilitate tax evasion anymore using banking secrecy) (Oswald Grübel, CEO, UBS today in le Temps)

He is said to have sent an e-mail to the staff to call for the strict respect of laws and regulations to enhance the good reputation of the bank. "Aucun écart ne sera toléré" (free translation : “No variation will be tolerated”), he wrote.





At the same time in Luxembourg:

« L’échange d’information sur demande fera qu’un contribuable étranger, soupconné de fraude fiscale grâce à des faits ou documents probants, pourra faire l’objet d’une enquête par son fisc national » (free translation: “the exchange of information upon request results in that a foreign taxpayer, suspected of tax fraud based on documentary evidence, can be investigated by his national tax department)
(Jean Meyer, Chairman ABBL, in the Lëtzebuerger Wort)


In Switzerland there is a commitment that states: “One will not be able to facilitate tax evasion any more” whereas in Luxembourg it will depend on evidence provided by the foreign tax administration.

Above all, in Switzerland they use the term “tax evasion” whereas in Luxembourg they use “tax fraud”.

This is confirmed by the recent ABBL press release that states against the study made for the “Cercle de cooperation”, : “Without making any noticeable distinction, the document in question assimilates very diverse issues such as tax fraud, tax competition, Money laundering, the problematic of North-South relations and intra-European discussions on the taxation of savings”

Why “tax evasion” is not quoted by the ABBL?

Tax evasion will remain in Luxembourg as many actors consider it is practically part of tax competition.

 

In the context of the debate on the depositary, let’s compare the regulators in France and in Luxembourg on a couple of telling criteria.

 

Figures (in EUR)

 

As far as investors are concerned, the Directive sets a Community minimum level of compensation per investor of Euro 20 000, while at the same time authorising Member States to provide for a higher level of compensation if they so wish. However, certain categories of investors may be excluded by Member States from the scheme's coverage or may be afforded a lower level of coverage. The arrangements for organizing and financing schemes are left to the discretion of Member States.

Clever investors will realize they seem less protected in Luxembourg than in France or Belgium, that both go beyond the directive.

 

 

Source:

 

Luxembourg

France

Belgium

 

I have raised that the Luxembourg regulator is much better than Irish regulator in the communication on Madoff.

The Irish regulator this week published its annual report 2008. It ignores Madoff despite Thema fund.

The Luxembourg regulator had published its annual report 2008 a couple of weeks ago. It does not condone Madoff.

 

 

In the previous article relating to Luxembourg I have evoked the impossibility for the actors in the Luxembourg jurisdiction to deal with change.
My wording was based on Spencer Johnson’ famous book: “Who moved my cheese”

I am afraid Switzerland did not realise either the paradigm shift.

In an article Didier Remer lays emphasis on the Swiss situation.

Angel Gurría confirmed in the columns of le Temps that banking secrecy was in question and that the engine was launched, that it would not stop, that the collision was imminent
Swiss leaders were informed of the evolution of international mentalities, and systematically informed on collaboration between OECD and G20.
Additionally, neither Switzerland nor Luxembourg attended the OECD meeting last October, which was the beginning of the process of the reviewing of the OECD list.

The jurisdiction is not exactly in the same situation as Luxembourg. It has a long tradition of finance. It has various alternative industries to finance. And as Didier Remer observed there is a political debate.
(in an article I had highlighted huge business differences between both jurisdictions. )


To the contrary, in a recent interview, Jean Asselborn, who is Vice Prime Minister of Luxembourg stated (in order to soothe and to reassure?) that there is still the fund industry in Luxembourg which has great competences, and many countries trust us, and that there are as well the credit markets (il y a d’autres atouts. Par exemple, au Luxembourg il y a l’industrie des fonds qui a des grandes compétences et beaucoup de pays se fient à nous. Il y a aussi tous les marchés des crédits.)

The problem is that with Jean Asselborn’s statement Luxembourg goes on selling a stinking cheese with
- the Madoff story that just did not happen by chance in Luxembourg, and
- Bank Landsbanki that went bankrupt in a dubious context
- etc.

The problem is that Jean Asselborn belongs to the left wing of the governing coalition.

Which demonstrates that no politician in Luxembourg never ever questions the dysfunctions.

The annual report 2007 of SICFIN, the Monaco FIU, informs of the staffing of SICFIN and of its positioning:

Le SICCFIN, est un service administratif relevant du Département des Finances et de l’Economie qui répond à la définition internationale des Cellules de Renseignements Financiers. Le service est composé de 9 agents, spécialement commissionnés et assermentés. Le personnel du SICCFIN possède un profil bancaire et financier, complété par des connaissances juridiques, avec, pour certain, une spécialisation en audit et en contrôle. Ces compétences sont également complétées par des stages auprès d’autres CRF, notamment CTIF-CFT. A ce titre, des échanges réguliers ont lieu avec TRACFIN ainsi qu’avec la Commission Bancaire française afin de confronter les expériences de chacun en matière de lutte contre le blanchiment de capitaux et le financement du terrorisme.
Depuis 2005, le SICCFIN est doté d’un nouveau système informatique développé afin de répondre aux besoins nés de l’évolution de son activité.


There are 9 people with a banking and financial profile.
It is like most FIUs an administrative body under the responsibility of the Ministry of Finance.



The annual report 2007 of the CRF, the Luxembourg FIU, informs of the staffing of the CRF and of its positioning:

La structure de la CRF est demeurée identique à celle existante pour l’exercice précédent, à savoir qu’elle est composée de deux magistrats à plein temps, d’un magistrat à mi temps, d’un analyste financier et d’une secrétaire. Les activités de la CRF se déroulent sous la direction du Procureur d’Etat Robert BIEVER et du Procureur d’Etat Adjoint Jean-Paul FRISING. La CRF est épaulée dans ses devoirs de renseignement financier par un membre de la Section Anti-Blanchiment du Service de Police Judiciaire. Les quatre autres membres de cette section se consacrent plus particulièrement aux enquêtes pénales proprement dites (enquêtes préliminaires, informations judiciaires, exécution d’ordonnances prises dans le cadre de l’exécution de certaines commissions rogatoires internationales dans lesquelles le blanchiment est libellé par l’autorité requérante).

There are 4.5 people including a secretary in the CRF stricto sensu plus the support of members of the Service de Police judiciaire.
The CRF acts under the supervision of the prosecuting authorities.





We have seen that the number of declarations of suspicion in Luxembourg is not consistent with the importance of assets managed. The ratio of Suspicious Transaction Reports per $1billion in assets for Luxembourg, fund industry excluded, is 6 times less than Monaco

If I take into accounts only banks, as I have a comparison point with Monaco, the number of declarations of suspicion in Luxembourg is not consistent with the business activity in the jurisdiction.

In 2007, of 156 banks, 63 only reported a declaration of suspicion, which is almost the number of banks in Monaco according to CIA World Factbook. This means that 60% of banks in Luxembourg never ever had a dubious client to be reported to the FIU. This is not serious and is definitely worrying for the enforcement of the AML procedures in the jurisdiction.


My observations are consistent with the Narcotics Control Strategy report 2009, which observes that in Luxembourg the scarce number of financial crime cases is of concern, particularly for a country that has such a large financial sector.

The ratio of Suspicious Transaction Reports per $1billion in assets for Luxembourg, fund industry excluded, is 6 times less than Monaco
The ratio of Suspicious Transaction Reports per $1billion in assets for Luxembourg, fund industry included, is almost 17 times less than Monaco.

Some might have thought that my blog expresses some biased opinion, such as in this comment. Unfortunately they are fact. And they cannot fool the people behind the Narcotics Control Strategy report 2009, which observes that in Luxembourg the scarce number of financial crime cases is of concern, particularly for a country that has such a large financial sector.

There is a motto that is used by professionals in Luxembourg : They usually answer critics that what they criticize about Luxembourg ignores the law and the reality of the Luxembourg Financial Center. Comparing financial centers demonstrates that unfortunately Luxembourg is not at the level of the other jurisdictions.

I do believe that those who really support Luxembourg in the long term are not those who hush up issues or deny dysfunctions or even seem to justify them by calling upon the bad actions of others (sales of weapons...) True support comes from those who have a broad view and understanding of what is at stake in the world.

Who said five years ago: “We want to remain what we are. Yes, we want to remain what we are and for this reason, we must change to adapt and evolve. The world does not wait for us. And we should not wait for the world. We must go and meet it, otherwise it crushes us.”

Jean-Claude Juncker (Declaration of August 4th, 2004)



I am afraid he had bad advisors who ignore the laws and the realities of the world.



FIU Monaco report
FIU Luxembourg Report
CIA World Factbook
Narcotics Control Strategy report