Ethics and governance in the European Financial centers

The Independant has reported that the Irish arm of banking giant HSBC is facing another court action here arising from the bankruptcy of alleged $50bn fraudster Bernard Madoff and his companies.

Kalix Fund Ltd, registered in the British Virgin Islands, is suing HSBC Institutional Trust Services (Ireland) Ltd, Grand Canal Square, Dublin, for $35m given by Kalix for investment purposes to a sub-fund of Thema International Fund plc, and later allegedly passed on to Madoff companies by the HSBC company.

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Yesterday Czech Finance Minister Miroslav Kalousek, whose country currently holds the EU presidency, said he personally wanted to apologize to EU nations on the OECD list because "in no way are they non-cooperative jurisdictions or tax havens" and it was not fair to put them on the list.

As I said, banking secrecy is not a problem in itself. The problem is the use of it. Even so low taxes are not a problem in themselves. The problem is the lax framework of the jurisdiction.

The European Union was neither intended for some jurisdictions to trap finances of the others nor to provide these jurisdictions with a kind of impunity and untouchability.

 It  is because of this feeling of impunity and untouchability thanks to their memberships to organisation (OECD, European Union…) that the EU nations on the list were so upset.

I was just wondering about the reasons why the Czech Republic condones that there are jurisdictions in the European Union that are a problem, and especially Luxembourg, not only because of banking secrecy, but as well and above all because of a lax environment compared to other European jurisdictions including Belgium and Austria.

Unless one finds it normal that, like in Luxembourg, in a small jurisdiction where everybody knows everyone:

-          the corporate registration is full of companies with no economic reality and/or exotic statutory auditors or firms,

-          banks knowingly help to commit fraud especially since the Liechtenstein scandal without being officially repudiated,

-          business ethics does not exist in the vision of CSR,

-          transparency is not sought : some key databases donot exist (balance sheet database, judiciary judgements) compared to other jurisdictions

-          leaders, either politicians or professionals, do not question the demonstrated dysfunctions: they show their psittacism as they repeat  “Luxembourg is not a tax haven” while they keep silence on the above issues.

-          etc.

Why does the Czech Republic condone that?

There may be one good reason for the Czech Republic: BU-SI-NESS.

“Czech Open Days” are taking place today in Luxembourg at the Chambre de Commerce.

The event was in the pipe early this year prior to the G 20:

BusinessWeek reported that at a meeting of finance ministers yesterday in Brussels, Germany's finance minister that he doesn't need to apologize to neighbors such as Switzerland for accusing them of aiding tax evasion

Steinbrueck compared Switzerland, Austria, Luxembourg and Liechtenstein with one of the world's poorest nations, Burkina Faso, because the four European nations had boycotted talks on tax evasion last year.

He said they shouldn't complain that they now appear on a black list published by the Organisation of Economic Co-operation and Development.

"They all could certainly have come. And obviously I'll also invite them to the follow-up conference in Berlin in June: Luxembourg, Liechtenstein, Switzerland, Austria and Ouagadougou," Steinbrueck said.

Ouagadougou, the capital of the struggling west African nation, learned in 2008 that the World Bank had named the country the least favourable on the continent for investors.

Steinbrueck is excessive. But it is true that some hove these jurisdictions are like developping countries for their justice, their police, the missing databases (judiciary judgement online, balance sheet database)... when they find the money for there misleading communication to deny to be a tax haven even though this is much more a business and banking haven situation (offshore abuses, scams...).