Ethics and governance in the European Financial centers

Jean Claude Juncker yesterday stated that “neither financial product nor actor of finance should be able to escape from the regulation and the control mechanisms”. “The chart of the economic and financial world should not be sullied any more by black holes”, he concluded.



What a charade when one observes some Luxembourg-registered companies and some statutory auditors in Luxembourg, which escape from the regulation and the control mechanisms thanks to the abuse of offshore in Luxembourg, notably with many jurisdictions that are considered as tax havens by the OECD.

Switzerland is very angry against the OECD.
By trying to please everyone the OECD is now caught in its own trap of kindness and political games.
Its credibility is now in question.

As I wrote in my second letter to Angel Gurria, the solution is simple: if States that do not have signed yet the required agreements are not happy with the OECD, let them leave.

Considering the ridiculous amount of their contributions to the OECD budget, it will quickly be compensated by the advantages for the other States to recover funds escaped in the jurisdictions.

As far as Switzerland is concerned, I had warned Hans Rudolf Merz’s services to beware of Luxembourg, as Switzerland is more credible than Luxembourg in the implementation of the international recommendations in business ethics.

This is what I explained in two articles in French published in Banque & Finance in Switzerland:
"Suisse ou Luxembourg: quelle est la place la plus crédible en matière d’éthique?" (January 2007)
“La Suisse est-elle un paradis fiscal?" (septembre 2008) http://www.banque-finance.ch/numeros/93/70.pdf

My conclusion is that despite banking secrecy and low taxes in Switzerland I can see in this jurisdiction a positive framework in favor of business ethics that I cannot see in Luxembourg.

The political error of the Swiss authorities was (and still is) to bet on Luxembourg to advocate their positions within the European Union without seeing that Luxembourg was a manipulator.

The political error of the Luxembourg authorities was (and still is) to ignore what the other jurisdictions are doing, otherwise they would have realised that ratios to compare Luxembourg with other jurisdictions are definitely not in favour of Luxembourg, whose figures are not credible :
- number of disciplinary actions for auditors : ex Luxembourg v. Belgium
- number of declarations of suspicion : ex Luxembourg v. Monaco
- …

In a democracy when political authorities fail, there is a solution.

I went through the Memorial C (the Luxembourg Corporate Registration) and I found a really strange situation that is worth commenting.

We have Company A with Mr X as Subscriber and director of Company A.
The object of this Company is the holding of participations, in any form whatsoever, in Luxembourg and foreign companies, the acquisition by purchase, subscription, or in any other manner as well as the transfer by sale, exchange or otherwise of stocks, bonds, debentures, notes and other securities of any kind, and the ownership, administration, development and management of its portfolio. The Company may also hold interests in partnerships.

We have Company B with Company A as Subscriber. Mr X who is Subscriber and director of Company A is appointed statutory auditor. Mr X havs the same professional address as the two directors of Company B
The object of this Company is the holding of participations, in any form whatsoever, in Luxembourg and foreign companies, the acquisition by purchase, subscription, or in any other manner as well as the transfer by sale, exchange or otherwise of stocks, bonds, debentures, notes and other securities of any kind, and the ownership, administration, development and management of its portfolio. The Company may also hold interests in partnerships.


Why the object is duplicated?
How the statudory auditor of the second company can do the job as he is subscriber and director of Company A that is subscriber of Company B?
What is the independance of the statutory auditor of Company B?


Such situations are definitely a risk for the reputation of the Luxembourg jurisdiction.