On Luxembourg’s contribution to financial instability

   0   0 Blog, Finance Curse, Tax Havens & Financial Crisis

200px-Landsbanki.svgSince 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.

Here at the TJN conference in London we’ve just heard a fascinating presentation called Iceland: the Offshorisation of an Economy.

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.”

 


Related Posts

UN must defend target to curtail multinational companies’ tax abuse

Photo by Luca Santori, Creative Commons LicenseThe Tax Justice Network, The Independent Commission for the Reform of International Corporate Taxation, and the Global Alliance for Tax Justice call on the UN Secretary General to make sure the commitment to action on tax abuses by multinational companies remains part of the new UN Sustainable Development Goals.

READ MORE →

The BVI: Responsible for worldwide tax losses of $37.5 billion a year

BVI report blogAn extraordinary report by consultants Capital Economics, for BVI Finance, claims that the British Virgin Islands are responsible for $1.5 trillion of assets invested around the world, and that these result in 2.2 million jobs and $15 billion in tax revenue. A better approximation would be that the BVI imposes global tax losses of $37.5 […]

READ MORE →

Event: Making Tax Work for Women in the UK and Globally

Invitation_ Tax and Gender eventOn Wednesday 28th June 2017 at 16.30 our very own Liz Nelson will be speaking at an event in London that aims to bring together gender and tax justice advocates to highlight the need for coherent and gender-responsive fiscal policies to safeguard the rights of women and girls both in the UK and globally. The […]

READ MORE →

Historic event on women, human rights and tax justice in Bogota

BogotaLast week civil society organisations, researchers, labour union activists and policy makers met in Bogota, Colombia to explore how tax justice issues can ensure governments, multinational corporations and others meet their obligations to women in order to secure their full range of human rights. The Women’s Rights and Tax Justice conference opened with a conversation […]

READ MORE →

The Offshore Wrapper: the Panama Papers, one year on

Photos from the Protest outside PwC 1 Embankment Place, part of the Global week of action for tax justiceWelcome to the Offshore Wrapper – your weekly update from TJN.  Happy Paniversary! This week it’s been one year since the Panama Papers were leaked, and a number of organisations around the world have been marking the occasion though the global week of action for tax justice. In London, activists from the TJN and the […]

READ MORE →

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to Top