Ethics and governance in the European Financial centers - general

Tax haven clamp down moving to enforcement phase: OECD

noreply@blogspirit.com (jturquey) — Fri, 04 Dec 2009 05:26:00 +0100

Reuters reported that according to Jeffrey Owens, a global crack down on tax evasion in financial centers is moving into a more difficult enforcement phase.

This is exactly what I said with the significant example of Luxembourg where the enforcement is dubious.

TI implicitly admits in the FAQs that the CPI

noreply@blogspirit.com (jturquey) — Thu, 19 Nov 2009 05:39:00 +0100

I quoted yesterday Dr. Johann Graf Lambsdorff, creator of the Corruption Perceptions Index. He said in an email to the Transparency International network: "It is you, the movement, that will have to start anew to educate TI-S to deliver an acceptable product."

TI published the CPI but with a new paragraph in the FAQs that did not exist the previous years. This paragraph confirms implicitly that the CPI is of no avail and therefore is not an acceptable product.

To answer the question "Is the country with the lowest score the world's most corrupt country?", TI states in 2009 that

No. The country with the lowest score is the one where corruption is perceived to be greatest among those included in the list. There are more than 200 sovereign nations in the world, and the latest CPI 2008 ranks 180 of them. The CPI provides no information about countries that are not included.

Example: What is implied by Somalia’s ranking in the CPI 2008?

Corruption in Somalia has been perceived to be the highest in the CPI 2008. This does not, however, indicate that Somalia is the ‘world’s most corrupt country’ or that Somalians are the ‘most corrupt people’. While corruption is indeed one of the most formidable challenges to good governance, development and poverty reduction in Somalia, the vast majority of the people are victims of corruption. Corruption by powerful individuals, and failure of leaders and institutions to control or prevent corruption, does not imply that a country or its people are most corrupt.

In the same light, New Zealand – whose perceived public sector corruption is the lowest of the 180 countries surveyed – is not necessarily the ‘world’s least corrupt country’ – and New Zealanders are not in turn immune to corruption. Though its institutional and governance framework have translated into what is perceived to be a success, with limited corruption, New Zealand – like any other state – remains susceptible to corruption.

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This last paragraph was added this year whereas the question about Somalia was merged (it was another question the previous years).

2008

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2007

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The Corruption Perception Index is not actually an acceptable product, but TI lays emphasis on the possible misinterpretation like it was the case in Luxembourg: "Gute Noten für das Großherzogtum" (Wort), "Le Luxembourg douzième du peloton des incoruptibles" (L'Essentiel).

By the way, Luxembourg, the only democracy were NGOs were attacked, was ranked N° 2 by TJN for its financial secrecy and however TI states in the press release this year that "Financial secrecy jurisdictions, linked to many countries that top the CPI, severely undermine efforts to tackle corruption and recover stolen assets. Corrupt money must not find safe haven. It is time to put an end to excuses,” said Labelle. “The OECD’s work in this area is welcome, but there must be more bilateral treaties on information exchange to fully end the secrecy regime. At the same time, companies must cease operating in renegade financial centres"

CPI: Transparency International smells the coffee

noreply@blogspirit.com (jturquey) — Tue, 17 Nov 2009 17:31:00 +0100

Transparency International today published its CPI (Corruption Perception Index).

The press release admits that the CPI is perfectible:

Financial secrecy jurisdictions, linked to many countries that top the CPI, severely undermine efforts to tackle corruption and recover stolen assets. Corrupt money must not find safe haven. It is time to put an end to excuses,” said Labelle. “The OECD’s work in this area is welcome, but there must be more bilateral treaties on information exchange to fully end the secrecy regime. At the same time, companies must cease operating in renegade financial centres.

It was reported in september that Dr. Johann Graf Lambsdorff, creator of the Corruption Perceptions Index, would no longer publish the landmark corruption ranking, he had said in an email to the Transparency International network. Lambsdorff wrote: "It is you, the movement, that will have to start anew to educate TI-S to deliver an acceptable product."

Transparency Indernational smells the coffee with financial secrecy.

60% of the top 20 jurisdictions of the CPI are jurisdiction identified by TJN in the FSI (Financial Secrecy Index) table.

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White liste: the OECD charade is going on

noreply@blogspirit.com (jturquey) — Fri, 13 Nov 2009 12:19:00 +0100

Liechtenstein and Singapore have passed into the "OECD's whitewash, sorry, white list category" (TJN wording).

Liechtenstein scored an 87 percent opacity score and Singapore scored a 79 percent opacity score on TJN Mapping the Faultlines project.

Thanks to Luxembourg - the first jurisdiction that was congratulated - and its draft law to enforce the OECD agreements, everyone now knows that there is a huge loophole in the enforcement of the agreements: the creativity of jurisdiction to bypass agreements.

Luxembourg has imagined the "discharging fine", that would allow practically banks to keep secrecy and make money thanks to a possible new service that could be charged to clients.

"The era of banking secrecy is not over".

European Commission - captive to financial special interests?

noreply@blogspirit.com (jturquey) — Sun, 08 Nov 2009 09:44:10 +0100

TJN has commented a new report from ALTER-EU that addresses a wide range of concerns relating to the way Expert Groups dominated by large private banks, insurance giants and a range of financial enterprises wield significant power within the EU legislative process - from the drafting of EU strategies and laws to their implementation.

Paul de Clerck member of ALTER-EU's steering committee, said: "The Commission only seems to be interested in listening to the advice of the finance industry, rather than acting in the interests of society. Light touch regulation may have made it easier to do business, but it has not protected our savings and our pensions from being gambled away. Now the Commission tells us they are tightening the rules but in reality their proposals still leave many loopholes. If the Commission wants to restore confidence in our financial systems, it must break free of this stranglehold of partial advice."

I agree with him. What happened with Madoff in the European jurisdiction is the result of poor controls and will at the European level (see my Fault Tree Analysis).

Read the report

TJN-USA Chairman testified before Senate

noreply@blogspirit.com (jturquey) — Fri, 06 Nov 2009 05:59:07 +0100

Jack Blum, Chairman of TJN-USA and GFI advisor, has been called before the Senate Homeland Security Committee to testify on the Incorporation Transparency Act.

Mr. Blum, the former Head of the United Nations Experts Group on Asset Recovery and a former investigator for the Senate Committee on Foreign Relations Subcommittee on Narcotics, Terrorism, and International Operations, stressed both the economic and national security benefits of shutting down US shell corporations.

Read the testimony

OCTA 2009

noreply@blogspirit.com (jturquey) — Thu, 05 Nov 2009 05:54:00 +0100

The fourth European Union Organised Crime Threat Assessment (2009 OCTA) was just published. "The OCTA is a core product of the intelligence-led law enforcement concept and its drafting is one of Europol’s top priorities", Rob Wainwright, Director of Europol, said.

It is a general overview of crimes. I wish they assessed a country risk.

Draft of new legislation against .S. corporations with hidden owners

noreply@blogspirit.com (jturquey) — Thu, 05 Nov 2009 05:43:07 +0100

Senator Carl Levin, D-Mich., have introduced new legislation to stop the formation of U.S. corporations with hidden owners. It is subject of a Hearing before the Senate Committee on Homeland Security & Governmental Affairs.

Read draft

The results of the 2009 Financial Secrecy Index

noreply@blogspirit.com (jturquey) — Sun, 01 Nov 2009 05:42:00 +0100

TJN has just published the Financial Secrecy Index i.e. secrecy jurisdictions that they have ranked according to both their lack of transparency and their scale of cross-border financial activity.

Number 5 is the City of London in the United Kingdom, the world's largest financial centre with a Financial Secrecy Index Value of 347.79.
Number 4 is the Cayman Islands with a Financial Secrecy Index Value of 403.48.
Number 3 is Switzerland with a Financial Secrecy Index Value of 513.40.
Number 2 is the Grand Duchy of Luxembourg with a Financial Secrecy Index Value of 1127.02.
Number 1 is Delaware in the United States of America with a Financial Secrecy Index Value of 1503.80.

The average for the Financial Secrecy Index Value is 79.04 .

It is not a surprise for me to see Luxembourg with such score. I have been warning for years decision-makers in the jurisdiction to correct dysfunctions, lax behaviours. They did not that they thought that being a long-standing member of European Union, of the the Financial Action Task Force (FATF), of OECD... would provide both impunity and intouchability.

The censorship of Rainer Falk's report and the launch of LIGFI corroborate that the jurisdiction does not call itself into question.

I guess that as usual they will comment TJN's index by saying something like: Dubious index on financial secrecy: the ABBL responds. The ABBL deplores the fact that, behind a pseudo-scientific façade, this document calls into question thereputation and standards of the Luxembourg Financial Centre in general and of its members in particular. Luxembourg is a long-standing member of the Financial Action Task Force (FATF). Its efforts to preventmoney laundering have recently been highlighted by international organisations, such as the InternationalMonetary Fund (IMF). The ABBL has serious doubts about the methods used to draw up the study. The conclusions do not reflect a serious scientific approach. And blablabla.

TJN's work demonstrates to what extent OECD's work that is influenced by jurisdictions and political games is not relevant.

Leading economies blamed for fiscal secrecy

noreply@blogspirit.com (jturquey) — Sat, 31 Oct 2009 09:03:00 +0100

The Financial Times has reported that the Financial Secrecy Index will be published soon. This Sunday according to Richard Murphy.

The league table to be published by the Tax Justice Network, a respected campaign group, is led by the US state of Delaware and includes Luxembourg, Switzerland and Hong Kong in its top.

The index complies with Prime Minister Juncker's concern: it includes Delaware.

As TJN explains, the FSI (Financial Secrecy Index) is designed to identify the key contributors to global financial secrecy on a jurisdiction-by-jurisdiction basis. However, in some important cases, different level of secrecy prevail in different sub-jurisdictional entities. Since financial flow data are only systematically and comparably available at a jurisdictional level, this creates a potential problem. To deal with this, and recognising the impact that even marginal secrecy differences can have on the volume of illicit flows, we treat the most secretive sub-jurisdictional entity as representative of the potential for opacity of the whole jurisdiction, and therefore base its Opacity Score on this. The most obvious case where we have applied this technique is with the US state of Delaware, which is taken as representative of the maximum secrecy available within the whole jurisdiction (the USA).

This is exactly the point I raised a couple of months ago:

For Unions, Confederations and other multi jurisdictional states, the weakest link in the chain would give the country's final grade. For Switzerland it may be Zug, Delaware for the US, Andorra for France, Hong Kong for China...

The result would be surprising.