Ethics and governance in the European Financial centers

“Financial centre: diversification is the key”, Luc Frieden said in a recent propaganda video.

 

I would say: Financial centre: truth is the key.

  

It is no use repeating that Luxembourg is a regulated financial center that is not a tax haven, if blatant dysfunctions and risks are not solved.

 

This is the reason why LFF failed : it was a good idea but promotion turned out to be propaganda that does not work in a world of communication and information.

 

By ignoring the lax business environment that is attractive for fraudsters, LFF is not credible.

 

• Why is it that in this tiny jurisdiction, works that dare question on the dysfunctions are repudiated like the study from the Cercle de Cooperation?
• Why is it that in this tiny jurisdiction the penal liability of legal persons does not exist?
• Why is it that in this tiny jurisdiction, bogus professionals, that are neither regulatory auditors nor chartered accountants, go on creating firms that are actual scams?
• Why is it that in this tiny jurisdiction anybody can be a statutory auditor including exotic firms from the BVI, the Seychelles and so on, that are not controlled?
• Why is it that in this tiny jurisdiction ethics is not part of CSR, which is limited to promotion actions?
• Why is it that in this tiny jurisdiction the PSF status is used by some firms, and especially confidentiality, to prevent the manifestation of the truth before the justice by intimidating former employees with a complaint even though the testimony is fair (e.g. fraud or money laundering cases)?
• Why is it that in this tiny jurisdiction professionals who demonstrated their poor ethics and governance while having financial resources remain reputable and competent for the fellow members in their business networks?
• Why is it that in this tiny jurisdiction money from foreign taxpayers is accepted without control?
• Why is it that is this tiny jurisdiction parliamentary parties agree quickly to change the constitution against the Grand Duke while tergiversating to implement all the international recommendations (AML, fight against corruption)?

• Why is it that in this tiny jurisdiction 50% of banks never report a Suspicious Transaction Report?
• Why is it that in this tiny jurisdiction the financial sector that is an actual power influences the political decision-making process and the regulator?

• Etc.

The above are not "an unhealthy combination of gratuitous assertions, hearsay, half-truths and concocted lies " (ABBL wording to comment the study from the Cercle de Coopération) but are observations supported by facts in sources that are public or official.

 

These are observations that are of concern for clients and head offices of banks that have a subsidiary in Luxembourg.

These have been building Luxembourg as tax haven for many years and the other countries are not fooled.

 

 

For example, see Senate Bill 1069 (General Assembly of Pennsylvania) that was introduced the day before yesterday, page 15:

" Tax haven . " A jurisdiction that at the beginning of a taxable year is a tax haven as identified by the Organization for Economic Co-operation and Development, plus the sovereignties of Bermuda, the Cayman Islands, the Bailiwick of Jersey and the Grand Duchy of Luxembourg.

 

OECD doesn't even count. This opens another problem: 50 US states may not care about Frieden's 12 or more agreements

Luxembourg is a strange jurisdiction that can be described as an argocracy, from old Greek ἀργός (argós) “white, shining” and κράτος (krátos) “body politic”, “government”.

It is a political system based on three powers: Financial, Executive and Legislature in which the Financial power has the final word.

 

In particular, from a practical point of view, the financial power

 

1) Uses propaganda with the involvement of the minister of finance himself,

 

Videos like the one online today are similar to the communication movies in dictatorships: http://www.lff.lu/finance/speeches-presentations/financial-centre-diversification-is-the-key/

 

Propaganda is defined as communication aimed at influencing the attitude of a community toward some cause. As opposed to impartially providing information, propaganda in its most basic sense, often presents information primarily in order to influence its audience. Propaganda often presents facts selectively (thus lying by omission) to encourage a particular synthesis, or gives loaded messages in order to produce an emotional rather than rational response to the information presented. The desired result is a change of the attitude toward the subject in the target audience to further a political agenda 

 

My blog is not propaganda, it is opinion. I can support and congratulate Luxembourg whenever I think there are good things:
- Luxembourg has one of the best FIUs in the world because of its statute (prosecuting authorities and not administrative body),
- Luxembourg did a very good job in the Jurado affair
- Luxembourg has a strict legislation (on the paper) for the profile of the professionals of the financial sector

 

Luxembourg TV spots like all of Luxembourg’s communication, is propaganda as it presents facts selectively (thus lying by omission: e.g. the Commission considers that Luxembourg's legislation, in its current state, is not compatible with articles 2, 3, 10 and 11 of the Savings Directive and referred the jurisdiction to the European Court of Justice) to encourage a particular synthesis (Luxembourg is a regulated and compliant financial center) and it is wooden language as it diverts attention from reality by using vague and ambiguous words, which appeal to sentiment and emotionality rather than to facts, which are emphasized by the small size : in Luxembourg 50% of banks never report any STR which is not possible from a practical point of view (Source : FIU), sanctions are not dissuasive enough (Source: CSSF former Director), there are many possible scams that are Luxembourg-registered companies with exotic shareholders and/or exotic statutory auditors that are not controlled, there are many conflicts of interests as professionals influence the regulator (source : ALFI and CSSF), professionals responsible for reprehensible behaviour are removed from management while being granted compensations and hired knowingly by new employers (Source : CSSF)... 

 

For the little story, I sent an application to Fernard Grulms  when LFF was launched to offer my services for a communication based on the truth in the context of a true involvement of the jurisdiction to correct dysfunctions, and I contacted him more recently twice (read first e-mail and second e-mail). I never received a reply to my e-mails. In my opinion Luxembourg for Finance is a dying body that refused the friendly overture and which is locked up in the refusal and in the lack of tolerance.

 

Time is up for Mr Angel Gurria to smell the coffee, and not congratulate such jurisdiction, which is used by the actors as an argument not to call themselves into question whereas they communicate that they are not a tax haven.

 

Other examples of propaganda: Communist propaganda and Soviet propaganda

 

2) Decides on regulations,

 

Internal committees assist the CSSF in the analysis of the development of the different financial sector segments, give their advice on any question relating to their activities and participate in the drawing-up and the interpretation of regulations relating to their specific field. The members of these Committees represent the companies subject to the prudential supervision of the CSSF, professional associations representing the various segments of the financial sector as well as external auditors and legal advisers active in the financial field. (CSSF website)

Committees have very close and direct say on the evolution of the Luxembourg prudential regulatory environment governing the collective Investment Industry (Rafik Ficher, Member of the Board, ALFI, 2005)

 

3) Decides and authorises the financing on works and studies, which should in no case blame the financial sector,

 

The fact that Luxembourg NGOs now also get onboard that train is more than questionable. The fact that they thereby use such un-serious “studies”, is more than embarrassing. And the fact that they spent taxpayers’ money on this – because these NGOs are also funded with tax payers’ money – is outright scandalous (Fernand Grulms, CEO, Luxembourg For Finance, 2009)

 

4) Decides on which people to ostracise, in particular those who do not comply with the organisation’s procedures, practices and/or rules to bypass business ethics,

 

"There would seem to be very little likelihood in Luxembourg that a company employee who has been witness to misappropriation of funds will report this to the authorities. According to the union representatives interviewed by the examining team, the main reason for this is the country’s small size: everything becomes known very quickly, and so anyone who reports an offence will soon find himself labelled as an informant and excluded from the labour market" (OECD report, 28 May 2004)

 

5) Causes censorship.

Read my previous article

 

 

 

Such political system only exists in tax and judiciary havens.

 

The study from the Cercle de Cooperation was removed yesterday with the laconic message:

 Etude "Zur Debatte um Steueroasen : der Fall Luxemburg"

 

AVIS A NOS MEMBRES

 

Afin de donner suite aux reproches d’inexactidudes de l’étude « Zur Debatte um Steueroasen : der Fall Luxemburg », le Cercle a décidé de la retirer de son site et de se distancer des affirmations fausses ou inexactes y contenues. Les discussions sur les thèmes divers touchés dans l’étude seront poursuivies en automne. Le président du Cercle, Patrick De Rond

 

(free translation: Following the reproaches of inaccuracies in the study “Zur Debatte um Steueroasen: der Fall Luxemburg”, the Circle decided to withdraw it from its site and to distance itself from false or inaccurate assertions contained therein. The discussions on the various topics in the framework of the study will be continued in autumn. The chairman of the Circle, Patrick De Rond)

 

 

Remember what the Chairman of LFF wrote a couple of days ago:

 

 

It (the financial center) often came under attack these past months in foreign media, and quite often the criticism was pure invention. The fact that Luxembourg NGOs now also get onboard that train is more than questionable. The fact that they thereby use such un-serious “studies”, is more than embarrassing. And the fact that they spent taxpayers’ money on this – because these NGOs are also funded with tax payers’ money – is outright scandalous.

 

What Fernard Grulms stated is definitely  a kind of blackmail to eradicate critics with the threat to cut the NGOs financing in Luxembourg.

 

 

 

Today Grulm's text is no longer online.

The original text is there : (download pdf file)

It is no longer online:

 

Even in the newspaper where it was published : Tageblatt

 

 

Was the forced to withdraw Grulm’s text under pressure as the ABBL did?

 

If yes it is of concern for the independance of the fourth estate in Luxembourg that would be definitely under the influence of the financial sector.