3 - The Lessons of Luxembourg's Financial Centre: Towards a Certification of Ethics for Financial Centres to Replace Current Assessments

Summary

Luxembourg, under the spotlight over its banking secrecy, is defending its ‘philosophical’ choice, denying it is a ‘tax haven’ in a time of global financial instability when tax havens are in question. ‘To equate banking secrecy with a tax haven does not make sense’, Luxembourg Prime Minister Jean-Claude Juncker said on French television on 21 October 2008 after a critical report on his jurisdiction by the channel.

Prime Minister Jean-Claude Juncker stated an opinion that is shared by every professional and politician in Luxembourg. In answer to a question from the Member of Parliament Lucien Thiel, who is the former chairman of the ABBL (the Luxembourg Bankers’ Association) and advisor to its board of directors, Luc Frieden, who is Minister of Justice and Minister for the Treasury and Budget, specified that he wanted to make known the reality of the Luxembourg financial centre. The same Luc Frieden had affirmed before the IMF in 2002: ‘Personally, I have no doubt that my country can lead by example in promoting good governance, in fighting against the financing of terrorism and against money laundering, and in actively promoting development policies’.

It is true that the IMF issued a good report on the normative framework of the financial centre that would take into account the FATF recommendations, on which the financial sector and the political authorities communicate to repudiate critics on the functioning of the jurisdiction.

However, the normative framework and the declarations are not enough to assess the actual ethical values of a financial centre: it is necessary to observe on the one hand the functioning of its institutions and on the other facts of business life. This is not exactly what the international assessors do; they are like Catherine II visiting the Potemkine villages while sticking with the apparent legal and regulatory framework or soothing declarations from officials, which, unfortunately, very often constitute a frontage.