Ethics and governance in the European Financial centers

The media have reported that around 30 million US dollars of the Medellin drug cartel are still lying dormant since 1989 in several bank accounts worldwide of which in Switzerland, Panama and Luxembourg.

BGL and BNP Paribas confirmed, so did the Luxembourg prosecuting authorities.

This affair should not be used against Luxembourg for two reasons:

- on the one hand, in the 1980s and early 1990s  Luxembourg demonstrated its commitment in the fight against money laundering in the framework of the Jurado affair : Etienne Schmit, who was deputy prosecuting attorney had said "We hope this makes the criminals understand that we do not want their money" (quoted by the New York Times);

- on the other hand, FATF was created later, in 1990 : AML rules were not defined when the money from the Medellin drug cartel was put in Luxembourg accounts.

In the context of the publication of the Financial Secrecy Index last week, the Medellin drug cartel's money should not be used as evidence in disfavour of the jurisdiction even though there were significant changes later towards the so-called pragmatism in the regiulation and the legislation.

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).

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