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Alain Couret is a Doctor of Law and a professeur agrégé des Universités. He is a professor at the Sorbonne Law School, where he teaches corporate law and financial markets law. (...)

Full reference: Frison-Roche, M.-A., Against money laundering, what time matters? Does it work, between ExAnte and ExPost? (BIL case), Newsletter MAFR - Law, Compliance, Regulation, 11th of August 2020

Read, by freely subscribing, the other news in the Newsletter MAFR - Law, Compliance, Regulation

 

Summary of the news

The activity of money laundering is detrimental not only in itself but also because it permits the development and the sustainability of other criminal activities such as drug trafficking, weapon trafficking or human beings selling. Fighting against money laundering could permit to indirectly fight against these underlying activities, by the way very difficult to fight. Thus, the fight against money laundering has become a "monumental goal", which justifies the adoption of tools sometimes much more powerful than those used by classical criminal Law. For the sake of efficiency, the legal obligation to prevent money laundering is given to every body able to do it, as banks, real estate agents or gaming society, under the penalty of sanction. 

On 10th of August 2020, the Luxembourgish financial market supervisor convicts the International Bank of Luxembourg to pay a fine of 4,5 millions of euros because of weaknesses detected in its process of fight against money laundering. However, when the sanction has been pronounced, the bank had already remedied the weaknesses identified. It is important to observe that what is important for Compliance Law, it is not that a non compliant behavior is punished but rather that the crucial firm modifies its behavior in order to being more efficient in the realization of the "monumental goal", only concern of the public authority. Thus, an Ex Post sanction against the crucial operator is not an end in itself and can be justified only if it permits to incite the crucial operator to act or rather to desincite to do anything. Compliance Law is an Ex Ante legal system. 

 

To go further, read: 

• Frison-Roche, M.-A., Le couple Ex Ante - Ex Post, justificatif d'un droit spécifique et propre de la Régulation, 2006 (in French)

CAFAGGI, Fabrizio (ed.),Professor of Comparative Law, European University Institute, Italy. Elgar Publisher, 2012, 400 p. Globalization pushes the boundaries of markets. Alongside the greater “goods” of transnational economic activity come the “bads” of unregulated conduct. This important book looks to the new frontiers of legal intervention to make sure that global markets do not run riot over important public values. The signal contribution is not the search for ever higher levels of transnational authority – the superstates of a brave new world – but empowering numerous private actors to enforce legal norms in our fast-changing economic environment.

Michel Riguidel is Professor Emeritus at the Ecole Nationale Supérieure des Télécommunications, which has been renamed Telecom ParisTech, where he teaches digital security and new-generation networks. (...)

The Basel Committee on banking supervision issues regularly a monitoring report on the implementation of Basel III regulatory reforms.

In August 2016, the seventh issue was published by the Committee as to be taken into account for the upcoming G20 meeting: Implementation of Basel standards. A report to G20 Leaders on implementation of the Basel III regulatory reforms.

In this report, the Committee mesures how national systems gradually implement the prudential reforms they have informally elaborated in common. 

All the power derived from the Basel System stems indeed from the fact that it is concentrated; however, it still has to face a 'hard law' issue, as it is necessary to implement the reforms within the national systems in identical terms and in a constrained timeframe. 

The Committee indicates in its reports that some countries still face a number of issues regarding this implementation, whether these issues arise from the rules themselves or from the transposition period that the countries are given to implement them. Those same countries tend to justify themselves by saying that banks are to blame for these issues, since they report having trouble adjusting their information system as to satisfy the new requirements.

The Committee underlines the fact that this delay occurs in some countries whereas others are already compliant creates a situation of unfair 'jurisdiction' competition between them, which is all the more concerning since these national systems host international banks: "Delayed implementation may have implications for the level playing field, and puts unnecessary pressure on jurisdictions that have implemented the standards based on the agreed timelines. A concurrent implementation of global standards is all the more important, as many jurisdictions serve as hosts to internationally active banks.".

In order to improve an effective implementation of the whole system, the Committee proposed to implement instead a calculus method that would be less complex: "These proposals would constrain banks’ use of internal models and would reduce the complexity of the regulatory framework.".

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A few general observations can be drawn from this very specific Basel III issue underlined in the aforementioned report:

• soft law needs at some point to get concrete (which is closely monitored since the rules do need to be implemented), otherwise it is not law at all;   
• it is through implementation that the weight and the contours of common rules are actually being felt;
• this situation is a good reminder of the fact that competing jurisdictions are an actual thing and a issue to deal with;
• what is an argument based of complexity, or even impossibility, of the technical implementation of a requirement worth? 

This last question is crucial. Those who impose the requirement may consider that the non-enforcement for technical reasons cannot be accepted!footnote-68. Here, however, maybe since it is not a formal requirement as this is all soft law, and since there is a good communication between the supervisor and the executing agent (who is, at the same time, the one that is subject to the requirement, the one who elaborated it and the one who proposes to review it as to make it less complex).

Cass. R. Sunstein's last book was entitled Simpler. French Conseil d’État  (French administrative supreme court) conducts thorough work on the quality of laws and on their simplicity, both qualities that probably go hand in hand. The Basel Committee steps in the same directions...

Rating agencies are in the eye of the cyclone, due to the ambiguity of the situation: by their status, they are simple operators but by their role are almost regulators. Governing the markets, the banks can not for the moment dispense with them. However, the rating market is oligopolistic. On August 1, 2012, the association of German public banks complained that the prices practiced by rating agencies are monopoly pricing. What is remarkable is that this a complaint is made not to the European Competition Authority, the Commission, but to the European Banking Authority (EBA). Thus, regulation is a tool and a wider tool more than is the competition.

The Libor is the rate of the interbank market practised in the United Kingdom. A large number of financial operations are based on it. So far, its daily development is grounded on a declaratory system on the part of the banks. Since the conviction of Barclays on June 27, 2012 by the Financial Services Authority (FSA) and the general suspicion that a very great banks have contributed to manipulations of the Libor, the relevance of the system itself is questioned. While investigations and prosecutions was put in place for the past in all countries, British Government give to the Financial Services Authority (FSA) study of reform of a Libor, either to detach itself from a declaratory system, or to keep an eye on it and internalize effective sanctions. The report, which will serve as a basis for the reform will be made the end of September 2012.