Ethics and governance in the European Financial centers

AML regulation is based on soft law and not on hard law, so is the banking regulation. In other words professionals take care of the regulation by stating rules. But the rules that are defined by the negotiating parties (banks in a jurisdiction, jurisdictions at an international level) are not legally binding.
The success of soft law depends actually on the parties’ good faith.

But soft law should evolve into hard law for a party especially when this party weakens the credibility of the commitments by multiplying knowingly negligence, which is a serious threat for every negotiating party.

A couple of weeks ago I noted a dubious grant to the FATF from a state member to be audited all the more than there are many visible dysfunctions in the jurisdiction. The grant is mentioned in the 2006-2007 Annual Report (paragraph 54 page 17). Such grants are not a financing of the FATF : as explained paragraph 55 "Funding for the FATF is provided by its members on an annual basis and in accordance with the scale of contribution to the OECD. The cost of the secretariat and other services is met by the FATF budget, using the OECD as the channel for these operations. This scale is based on a formula related to the size of the country’s economy. Non-OECD members’ contributions are calculated using the same scale of OECD members. The two member organisations also make contributions to the FATF budget". According to the FATF public sources it is the first time that a grant took place and I hope the last time. And grants are definitely not part of the funding.


Paragraphs 32 and 33 of the FATF previous Annual Report (2005-2006) are worth reading again:

The effective implementation of international AML/CFT standards requires not just appropriate legislative, regulatory and organisational structures but a robust system of governance to ensure the integrity of the systems in place. Corruption poses an important threat to good governance and is therefore a major threat to the effective implementation of AML/CFT regimes.

The link between AML/CFT and corruption is twofold. Firstly, the proceeds of corruption, which may be considerable, are susceptible to being laundered. Secondly, corruption, and poor governance arising from corrupt institutions (such as the judiciary, the police, or regulatory authorities) and/or individuals, can substantially blunt the effectiveness of an AML/CFT system.
While some consideration has already been given to the link between AML/CFT and corruption, there is a critical need to (i) develop a greater understanding of how corruption damages the effectiveness of AML/CFT systems, and (ii) develop appropriate strategies to deal with the issue.

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A MULTI-millionaire has appeared in court charged with money laundering offences.

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