Ethics and governance in the European Financial centers

Bloomberg has reported that UBS AG won a ruling in a Luxembourg lawsuit filed by Banca Intermobiliare SpA seeking to force the release of 5.1 million euros ($6.5 million) from an account belonging to a fund that had invested with Bernard Madoff.
Banca Intermobiliare SpA argued UBS had a duty to pay it after sending the Italian bank a confirmation for a redemption request from the British Virgin Islands-based Groupement Financier fund made before Madoff was arrested Dec. 11.
As Bloomberg observed, While this decision was the first to deal with UBS as an account holder rather than as custodian, it may show that the regulator’s statement against UBS has “limited” influence on the courts.
It is positive as it demonstrates that Justice in Luxembourg is independant.
But it is negative as well as it confirms that what professional and politicians in Luxembourg said about the investor's protection is a charade : clear and pragmatic law and regulation means risk before the court.

The CSSF has yesterday published a press release (in French) about its investigation.
Olivier Sciales translated the findings :

The CSSF ordered UBS (Luxembourg) S.A. within a three-month-period :

1) to put into place the necessary infrastructure (i.e. all sufficient human and technical means and internal rules in order to carry out all the duties and tasks related to the function of custodian bank of a Luxembourg undertaking of collective investment in accordance with the law of 20 December 2002 on undertakings of collective investments, as amended from time to time (the "Law of 2002") and Circular IML 91/75. UBS (Luxembourg) S.A. is required to provide evidence of such adequate guarantees to the CSSF within a period of 3 months as of the date of notification of the decision of the CSSF to UBS (Luxembourg) S.A. It is important to note that the CSSF mentioned that the wrongful execution of the obligation of "due diligence" constitutes a serious breach of the supervisory duty (devoir de surveillance) of a custodian bank and can consequently constitute a violation of a contractual obligation in view of the legal provisions imposed by the Law of 20 December 2002. Article 36 of the Law of 2002 provides that "the depositary shall, be liable, in accordance with Luxembourg law to the shareholders for any loss suffered by them as a result of its wrongful improper performance thereof".

2) to analyse and rectify all the structures and procedures in place in relation to its supervisory duty (obligation de surveillance) as custodian bank and UBS (Luxembourg) S.A. shall pay damages in case of breaches to the above-mentioned supervisory duty as custodian bank imposed upon by Luxembourg law, without prejudice to any contractual provisions to the contrary and/or as the case may be any court decision.

The CSSF said it continues to probe the Madoff affair and is looking at depository banks and verifying that every intermediary have conducted their business according to Luxembourg law.

Nothing about the CSSF itself
Nothing about the auditor
Nothing about the perfectibility of the Luxembourg law
...

John Cummings has reported that American senators want that the Obama administration’s fiscal year 2010 budget to include an array of measures aimed at shutting down what they describe as “offshore tax abuses".

Levin clearly sees an opportunity to ride a wave of outrage over the deployment of the Troubled Asset Relief Program. Many of the firms listed in a GAO report are TARP recipients. For example, Morgan Stanley, which has 273 subsidiaries in tax havens or financial privacy jurisdictions such as the Cayman Islands, Luxembourg, and the Marshall Islands, has received $10 billion from the fund. Citigroup, with 427 subsidiaries in such jurisdictions, and Bank of America with 115, have each received $45 billion"