Ethics and governance in the European Financial centers

Challenge has reported that OECD is going to investigate in Monaco. The signature of most tax agreements with tax havens sounds like a way to fool the audience.

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Monaco is to be removed from an OECD "grey list" when it signs a fresh round of international tax agreements on Monday, the Telegraph reported.

As Oxfam, a French NGO, commented, this perspective sounds like a farce. Offam has the same reserves as the Global Forum on Transparency and Exchange of Information.

Tax agreement were signed with jurisdictions that are said to be havens : Andorra, Austria, the Bahamas, Belgium, Liechtenstein, Luxembourg, Qatar, Samoa, San Marino, Saint Kitts.

I am looking forward to reading the OECD press release that should look like the following (adapted from the PR for Luxembourg) :

The Progress Report initially published by the OECD Secretariat on 2 April 2009 in conjunction with the G20 has been updated, and Monaco moves into the category of “Jurisdictions that have  substantially implemented the internationally agreed tax standard.”

Having withdrawn its reservation to the OECD standard on exchange of information in March 2009, Monaco has shown rapid progress in updating its treaty network. Further negotiations are under way to update the exchange of information provisions in Monaco’s bilateral treaties.

Welcoming the recent signings, OECD Secretary-General Angel Gurría said: “I commend Monaco for its swift implementation of the OECD standards on exchange of information. In a couple of months, Monaco has turned into reality its commitment to fully cooperate in tax matters. I would like to congratulate Frank Biancheri for his leadership in this process”.

Monaco is thus contributing to strengthen the very important process of transparency around the world, where dozens of other agreements are being signed by different jurisdictions.

Mr. Gurría added that the Monaco government had informed him me that in line with the spirit and purpose of this collective effort they intend to continue the process of negotiating agreements which meet the OECD standard.

Angel Gurria is happy, the OECD is happy, governments in these jurisdictions are happy, bankers are happy....

I must be a fault finder...

The AFP has reported that Monaco has adopted a new law on money-laundering as part of a drive to clean up its financial sector in line with international standards.

Under the new rules, insurers, accountants, notarial firms, high-end traders and lawyers helping with property or financial transactions will all be asked to carry out checks on their clients.

The law also introduces a new 30,000-euro (47,000-dollar) cap on cash payments, and boosts the powers of the FIU.

I will comment later the possible traps in this legislation.

AFP has reported that Monaco has hired a trio of public relations experts to help the Mediterranean principality shed its image as an international tax haven, officials said the day ebfore yesterday.

Reuters has reported that Monaco will soon join moves to relax bank secrecy, following Belgium, Liechtenstein, Andorra, Switzerland, Austria, Luxembourg and others.

I will develop in the following days the situation in this jurisdiction that is smaller than Luxembourg, with a special responsibility for France.

Read IHT

Anti-money laundering and combating the financing of terrorism (AML/CFT) was highlighted by the Council of Europe Moneyval Committee’s adoption of the third round mutual evaluation report on the Principality of Monaco, which was prepared following IMF and FATF methodology.

The report follows the on-site visit of financial and legal experts in the Principality in 2006. It states among others that "the Principality has a satisfactory legal framework to combat money laundering and terrorist financing.” […] Overall, the Monegasque FIU is effective and the driving force behind the AML/CFT national efforts. Monaco has designated competent authorities to investigate and prosecute money laundering and terrorist financing offences […]. Measures for domestic and international co-operation are generally comprehensive as well. "

It is said page 12 that 381 declarations of suspicion were reported in 2007, of which 213 from banks (56%).
It seems that there are no declarations from registerd auditors but chartered accountants reported 7 declarations.
In 2007, the number of Suspicious Transaction Reports received by SICCFIN slightly dropped by 3.5% (395 declarations in 2006).

Read press release

The summary of the report on the Principality of Monaco was published last 18 December.

According to the report (paragraph 3), "the Principality has a satisfactory legal framework to combat money laundering and terrorist financing" but when reading carefully it appears that if the legal and regulatory frontage is OK, the implementation and enforcement is actually rather limited.

But the center passed the examination. Next assessment will be carried out by the IMF in March 2008 with the same credibility : it is the IMF that stated about Luxembourg in a report dated October 2004 that "Luxembourg has in place a solid criminal legal framework and supervisory system to address the significant challenge of money laundering faced by this important international financial center". There is a big gap between the visible framework and supervisory system (the frontage) and what is actually implemented and enforced (the "back office").

Read MONEYVAL report on Monaco