Ethics and governance in the European Financial centers

The Irish Times reported that a lease between the partners in a development and another company established by them to avoid paying VAT was invalid, because of the absence of prior written consent of the mortgagee. In addition, the lease and leaseback had no commercial reality and constituted an abusive practice under EU law, rendering invalid the VAT classification on the transaction.

Read JUDGMENT

As I already wrote, the "generous grant" that the FATF received from Luxembourg is a huge problem.


It seems that the Luxembourg government , seems did not communicate on the grant to the FATF whereas it communicates for other grants with a specific press release.

The grant is actually mentioned is the report of the Fonds de Lutte contre le trafic des stupéfiants 2006 as the projet GAFInet for an amount of 65000 EUR. The problem is that
- grants are not part of the funding as stated by the FATF itself,
- such grants from member states should not be accepted because of the role of the FATF acting as an auditor,
- Luxembourg seems to be the only giver of such grants as it is the only member state mentioned in the FATF report for a grant,
- by accepting the FATF disregarded that Luxembourg does not care of the implementation of the GRECO and OECD Recs including provisions relating to AML and that there are many dysfunctions in the jurisdiction it could not ignore, and later promoted Luxembourg and its behaviour by stating in the report "thanks to a generous grant from Luxembourg..." giving therefore de facto a recognition while not respecting international rules.

It is essential for the FATF to tighten up the ship and analyse the internal responsibilities for a situation that is not acceptable from an ethical point of view.



Examples of communication (French text):
Tsunami
Doha Program
Palestinians


etc

As the FATF states on its website, "the OECD is giving priority to combating economic crimes such as corruption and tax fraud. Its Principles of Corporate Governance and its work on beneficial ownership is of direct relevance to the FATF".

The OECD last year published a Glossary of International Standards for Criminalisation of Corruption where it is stated that "For the bribery offences, the briber must offer, promise or give the bribe with the intention that the bribed official act or refrain from acting in the exercise of his/her functions or duties, etc. For trading in influence, the briber must intend that the recipient of the bribe influence the decision-making by an official. However, this does not mean that the intended result must have in fact occurred. The bribery offences require proof that the briber intended to influence the actions of the bribed official; they do not require proof that the official did, in fact, alter his/her conduct. (…) Proving the requisite intention is not always an easy task since direct evidence (e.g. a confession) is often unavailable. Indeed, bribery and trading in influence offences can be difficult to detect and prove due to their covert nature, and because both parties to the transaction do not want the offence exposed. Therefore, the offender’s mental state may have to be inferred from objective factual circumstances. (…) It is vital that the rules of evidence in criminal procedural codes permit this form of proof."

To implement what the OECD states the OECD explains that “Ethics is everybody’s responsibility, including that of an assertive media, which through its probing reporting helps citizens to act as watchdog over the actions of public officials” (Measures for promoting integrity and preventing corruption 13 octobre 2004,). In other words, the OECD, encourage the citizens and/or the justice to report as watchdog what the OECD calls the “objective factual circumstances” that can be determined by asking three series of questions on the giver’s interest to act, the relevance of the grant for the recipient and the communication on the grant should it take place.

The giver’s interest to act

Two dimensions must me assessed: the functioning of the jurisdiction where the giver located is located and his/her/its relationship with the recipient

A couple of questions relating to the jurisdiction should be asked :
- Is there a TI (Transparency International) chapter?
- Is the jurisdiction well ranked in its area in TI Barometer?
- Are Recs to fight corruption (GRECO, OECD Working group on bribery) implemented?
- Does the liability of legal person exist in the penal law?
- Is the press actually acting as a watchdog?

These questions are not exhaustives. The answer « no » to one or several question(s) should incitate the recipient to refuse the grant as it would be clues of “objective factual circumstances” as the OECD said.

Another critical question should be asked : does the giver expect or may the giver expect something from the recipient because of his/her/its role (a report, an assessment, a decision...) The answer « yes » should incitate the recipient to refuse the grant as it would be a clue of “objective factual circumstances” as the OECD said.

The relevance of the grant for the recipient

To assess, the relevance of the grant for the recipient, two dimensions should be taken into account: the risk for the recipient’s independance and the status of grants in the recipient’s funding.

To assess the risk for the recipient’s independance, three questions from Transparency International (6th TI principle) should be asked:
- May the funding compromise the recipient' ability to address issues freely?
- May the funding compromise the recipient' ability to address issues thoroughly?
- May the funding compromise the recipient' ability to address issues objectively?
- May the giver remind later the recipient of the grant to negociate a favor?
The answer « yes » to one or several question(s) should incitate the recipient to refuse the grant as it would be clues of “objective factual circumstances” as the OECD said.

Another critical question should be asked to verify if such grants are part of the recipient’s funding? The answer « no » should incitate the recipient to refuse the grant as it would be a clue of “objective factual circumstances”, as the OECD said.

Additional question for a retoactive analysis if the grant took place

Is the grant communicated by both parties, the giver and the recipient?

The answer « no » would build the “objective factual circumstances”, as the OECD said.


This pragmatic framework to assess “objective factual circumstances” as recommended by the OECD and the FATF that implement the Principles of good governance as stated by the OECD, allows identifying situations where the giver is de facto a briber, which must be reported as recommended by the OECD and the FATF that implement the Principles of good governance as stated by the FATF.