Ethics and governance in the European Financial centers

In various articles of this blog I have highlighted dysfunctions and deficiencies in the Luxembourg financial center to show poor ethics and poor governance, contradicting the official propaganda on compliance with FATF Regs and on the positive IMF assessment on the legal and regulatory framework to fight ML and the financing of terrorism.

Two years ago I had warned that when FATF visits Luxembourg in the next months, it might consider what is behind the frontage of compliance.

The Mutual Evaluation of Luxembourg, which was published in 2010, was actually terrible for the center and required a strong political action with new legislation built in emergency.

Despite the last FATF report which underlines many areas of noncompliance, I can see positive evolutions over the last year:

-              Introduction of criminal liability for legal persons (Law 3 March 2010),

-              Creation of a TI Chapter,

-              Confirmation by FATF that the Luxembourg FIU is efficient (what I already said) and confirmation of the original status of the body as part of the prosecuting authorities,

-              Strong reactivity to change legislation and comply with AML Regs after the release of FATF report

However opinions that are critical should be accepted and welcomed, but they are too often not. The stake is to avoid that the center becomes zombie, because it would have "created an insulated culture that systematically excludes any information that could contradict its reigning picture of reality", as S. Finkelstein wrote.

How can the talk about compliance be credible when people are upset even with with healthy criticicism of public dysfunctions?

At stake is as well the possibility to be credible enough to actually promote less regulation and rules.

Compliance requirements should actually be adapted to financial centers and financial institutions taking into account the ethics and compliance awareness: the more credible a centre/company is for its regulation, the less requirements it should have.

In a recent interview Laszlo Kovacs confirmed that banking secrecy should be given up in a couple of months.

Algirdas Semeta, who is his sucessor, will go on the same policy as him.

Dow Jones has reported that confidential files that an informant may be offering for sale to Germany's government files that may contain information on 1,500 German taxpayers using Swiss bank accounts to avoid taxes.

"We would consider it rather delicate for a state operating under the rule of law to make use of illegally obtained data," Doris Leuthard told Swiss media at the sidelines of the World Economic Forum in Davos.

Who started ?

Banks that accepted money from foreign taxpayers that did not pay their taxes definitely did not operate under the rule of law of foreign jurisdictions to make use of illegally accepted money.