A group of investors in Luxembourg funds have been trying to lodge complaints with the Luxembourg financial services authority, CSSF, after enduring losses in 2008. According to the FT (paywall), the group got a negative answer and little understanding from the CSSF in 2011 and has since been trying to get their complaints taken seriously, lately by sending a flurry of letters to prominent politicians in Luxembourg, i.a. PM Jean-Claude Juncker and Minister of Finance Luc Frieden.
One of the group’s interesting discoveries is that although financial regulation in Luxembourg is, on paper, comparable to other EU countries, the enforcement lags far behind. The result seems to be that if things go sour, as in these investments, the CSSF allegedly is not there to protect the interests of investors. The feeling is that Luxembourg is a country where the interests of the financial sector are seen to be best served by doing very little about eventual rogue elements.
This attitude of the CSSF will not come as a great surprise to regular Icelog readers.* Icelog has earlier dealt extensively with the plight of a group of clients of Landsbanki Luxembourg to get authorities in Luxembourg take their complaints seriously. Complaints that both regard the dealings of the bank before its demise in October 2008 and also how the bank’s administrator has handled both complaints and these clients. This group has run into closed doors time and again. Only through the extremely diligent work of the Landsbanki Victim Action Group – at great cost, both pecuniary and emotional – is the group hopefully moving its case onward.
One of the most remarkable events in that whole saga was when the Luxembourg Prosecutor issued a press release to declare his support for the Landsbanki Luxembourg administrator, thereby alleging that the clients were seeking to avoid paying their debt. The fact that the State Prosecutor saw fit and proper to give his support to an administrator of a private company puts Luxembourg in a league of its own among EU countries.
The banking collapse in Cyprus has led the attention to other financial centers in small economies, such as Luxembourg. It seems that much of the shady money, previously nesting in banks in Luxembourg, has not gone back to countries of their owners, such as Russia, but is seeking shelter in other offshore places, Luxembourg being one of them. It seems that ties between Russian and Luxembourg might be strengthening.
The fact that the Luxembourg media and international media is now reporting more on irregularities in Luxembourg increases the hope that the Luxembourg finance sector will at long last operate under the rules and regulations as should be the standard in the EU. Though Luxembourg certainly is not the only country with questions to answer regarding its finance sector, it still seems too difficult for clients of the very potent financial sector to seek justice in cases of alleged irregularities and outright fraudulent behaviour.
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