Since the global financial crisis erupted we’ve been running a web section called tax havens & financial crisis – which looks at the risks that tax havens pose to financial stability.
Perhaps the strongest thread running through this page is the fact that tax havens provide escape routes from rules – such as financial regulations – which enable players to take the cream while the going is good, and then heap the costs and risks onto the rest of society when things fall apart.
We’ll bring a more considered blog on this in due course, but first we’d like to point to a blog run by the presenter, Sigrún Davíðsdóttir, who is an Icelandic journalist. From her Icelog, an article about the failed Icelandic bank Landsbanki. We’ll just publish a brief excerpt from this, as a marker to highlight Luxembourg’s role in this whole sordid business.
“The saga of Landsbanki Luxembourg, its equity release loans, its other operations, the behaviour of the bank’s administrator and the unwillingness of the Luxembourg financial regulator, Commission de Surveillance du Secteur Financier, CSSF, to investigate both the bank’s operations and then the administrators is a long and sad saga, which has often been brought up on Icelog (see earlier blogs here).
It can’t be said often enough – and I say it yet again – that it is impossible to understand the operations of the Icelandic banks without scrutinising their Luxembourg operations. Given the fact that managers and employees of all the three largest Icelandic banks have been investigated in Iceland and in some cases sentenced to prison and given that almost without exemption Luxembourg figures in these cases it is incomprehensible that the CSSF has not taken up a single case related to these banks.”
Read that blog – and follow the links to other of her blogs – to understand more about this episode.
This is reminiscent of something we noted last year in our Luxembourg report: a letter from a law firm acting on behalf of 2,500 defrauded clients of the Ponzi schemer Bernie Madoff:
“Our clients and their financial advisors have relied on the safeguards in place in Luxembourg, an international financial centre that openly prides itself as having an efficient system aimed at the protection of investors. . . . none of these institutions has been held accountable to date . . . these courts have so far denied access to justice to the numerous investors who followed the CSSF’s advice.”
(The CSSF is the Luxembourg supervisory authority.) Even though we acknowledged in that report that Luxembourg had made some improvements to its secrecy regime (an improvement to a very tarnished image that is currently being comprehensively undone by the current trial of public-interest whistleblowers and journalists) note that this issue – secrecy – was just one of many areas in which Luxembourg operates as a see-no-evil offshore centre dedicated to protecting ‘investors’ at the expense of anyone else who might have a legitimate claim against them.
There are many other things one could say about this – not least as we heard today in another fascinating presentation involving Luxembourg at our event. We’ll get to that in due course. But for now, a last word to Davíðsdóttir:
“When will the authorities in Luxembourg acknowledge that the many stories of financial malfeasance in the Duchy are a huge and ugly stain on this pretty little state at the heart of Europe? And when will other European countries bring enough pressure on the Duchy to confront the facts of the financial sector in Luxembourg: part of it is placed exactly there full well knowing that nothing seems sordid enough to wake the CSSF up.”