The hidden trillions: Secrecy,corruption, and the offshore interface

This paper considers the role of secrecy jurisdictions in creating a supply-side stimulus for corrupt practices and explores the use of the newly created Financial Secrecy Index as a tool for assessing and ranking such jurisdictions. Secrecy jurisdictions are a prominent feature of international financial markets, providing a combination of low or zero tax rates, lax regulation, weak international judicial cooperation, and—above all—legalised secrecy facilities. Citing the case of Barbados, this paper shows how an environment of legalised secrecy is purposefully created by not requiring disclosure of ownership information for corporations, trusts, foundations and other legal entities; through non-participation or ineffective participation in judicial cooperation and information exchange; and through laws to protect banking secrecy arrangements. Taken in combination these factors make secrecy jurisdictions attractive conduits for illicit cross-border financial flows and the harbouring of dirty money. Using secrecy jurisdictions as platforms for their operations, legal and financial intermediaries create complex and opaque offshore structures to facilitate economic crime and impede investigation. Current international efforts to stem the activities of secrecy jurisdictions are largely ineffective, but civil society is raising pressure for effective action to be taken against offshore secrecy.     

Eu search for regulatory answers to crypto assets and their place in the financial markets’ infrastructure

Crypto assets are no longer a niche topic for geeks but an important trend in financial markets and an uprising asset class. This is due to technological advancements, spike in token issuances, and Facebook's Libra project, now called Diem, among other things. Many potential benefits of crypto assets for the financial sector are widely recognized, including cost savings, improved efficiency and transparency. The rapid growth of the crypto assets ecosystem has intensified the focus of regulators. They are challenged to provide an adequate response, protect investors and customers, and mitigate risks while fostering technological development. Currently, at the EU-wide level, there is a regulatory gap, which contributes to legal uncertainty and weak investor protection. Several European jurisdictions have been proactive and successfully designed their own national regulatory solutions to crypto assets. Many European and international supervisory and regulatory bodies contributed to the debate and issued reports, analysis and statements highlighting risks and making regulatory recommendations. The European Commission took the first steps to assume its competence over all crypto assets within the EU and, after a comprehensive review of the entire crypto assets ecosystem, issued a proposal for a regulation on markets in crypto assets. This paper evaluates the EU's current regulatory approach to crypto assets against the background of the views and reports of several advisory and supervisory bodies and international organizations and against market developments.     

欧美金融监管的最新发展及其启示

金融危机过后,欧美对其金融监管法制进行了重大变革,尤其是在金融集团、信用评级、影子银行和场外金融衍生工具的监管方面。变革后的金融监管法制更加注重对金融创新的原则监管,更加重视金融监管的全球合作,更加凸显金融安全的价值目标取向。作为一个新兴加转轨的经济体,我国一方面要打破对欧美金融监管模式的顶礼膜拜,另一方面要用更加理性务实的态度与开放的心态借鉴欧美金融监管法制变革的经验,处理好金融创新与金融监管的关系,实现金融安全、金融效率与金融公平之间的竞争性平衡。     

The governance of the financial action task force: an analysis of power and influence throughout the years

The international fight against money laundering illustrates changes in global governance as a result of the increasingly cross-border nature of crime and the need it creates for all involved to cooperate. The economic priorities and security concerns that surround it contributed to the strong evolution of global governance in this area and the status of anti-money laundering as a shared problem. The creation of the Financial Action Task Force (FATF), its expansion and cementation throughout the years, is a good example of the many forces working together to responding to the demands of emerging criminal threats and trends. It offers a good illustration of how relationships in global governance have influenced FATF’s priorities and action and ultimately the way in which illicit financial flows are tackled. This analysis offers an overview of FATF’s network across time taking into account the role of states, international organisations, and the private sector in the decision-making processes. It argues that Great Powers – a small, but aligned, group of states of global economic relevance – are responsible for FATF’s direction and the international efforts against illicit financial flows. It suggests, however, that unlike what could be expected, their power is declining following the rise of private sector influence through resourceful, organised and transnational actions e.g. on information sharing.     

Is harmonization of legal rules an appropriate target? Lessons from the global financial crisis

This article deals critically with the call for a comprehensive harmonization of legal rules, against the background of the lessons from the recent financial crisis. Before coming to the topic of harmonization of legal rules, it first briefly deals with the question of why rules are necessary at all, and what the functions of rules are. Then it deals with the lessons from the recent financial crisis for the topic mentioned. The article conducts a kind of cost-benefit analysis of legal harmonization by looking at arguments in favor of and against uniform rules. It shows that not only the arguments in favor have increased after the recent financial crisis, but also the arguments against. It also shows that integration of global markets has not only increased the need for new uniform rules but also decreased the chances of their implementation; and that therefore today it is often better to improve the implementation of current rules instead of laying down new uniform rules.     

Water always finds its way: Identifying new forms of money laundering

Money laundering regulations have become stricter over time and involve more and more actors. This means that the accountability of laundering regulation will become more important; theoretically, money laundering should have decreased with the implementation of new regulations. However, as this paper shows, it is difficult to estimate even the sign of the trend in the proceeds of crime and of laundering over time with particular reference to the drug trade. There seems to be a substitution from hard to softer drugs, and no substantial decline in the proceeds of crime and likewise no substantial decline in money laundering. Criminals seem to switch from the more controlled banking sector into still less controlled parts of financial markets, and from financial markets to other sectors. These new sectors include electronic payments, trade and real estate. The paper shows how one can empirically approach the latter two by using economic information of unusual prices and other characteristics in order to identify the amount of laundering in these sectors. Combining economic information with criminological data facilitates the development of a new tool for identifying money laundering in some important sectors.     

Conflicts and coordination between the right to issue US dollars as international currency and the protection of international human rights

In the existing global financial system, the US private central bank controls the right to issue international currency, while the rest of the world have to involuntarily leave their destiny to such system. In the current financial crisis, American government evaded and deviated from due regulation. It is virtually a robbery of other countries as well as a serious infringement upon international human rights. In such a situation, other countries should stick to the international community standard and the protection of international human rights to fairly distribute the interest deriving from the right to issue international currency, and establish a monetary exchange mechanism; or abide by the principle of “one world, one currency” and accordingly come up with a common international currency, or form a monetary union to safeguard the economic sovereignties; or enhance the due position, rights and interest of the developing economies in the existing international financial system; or strengthen efforts in reforming and building the regime of international financial regulation to prevent people’s legitimate property, rights and interest from being infringed.     

当代国际法的新发展与价值追求

在人类面临新挑战与国际社会出现新变化的背景下,国际法全球化与碎片化共存的现象明显,国际法的刑事化现象不断增多,国际法与国内法相互渗透、相互影响的趋势更加凸显, 国际法的调整范围不断向非传统安全领域扩展。与此同时,当代国际法所肩负的期望和使命也越来越多。发展、安全、人权等国际法价值目标已经得到了国际社会的普遍认可,国际宪政思潮已经成为国际法学界不能回避的课题,国际社会的民主和法治已成为时代要求,国际社会共同利益的理念已渗透到国际法中。     

Regulating Hedge Funds for Systemic Stability: The EU's Approach

This article offers a critical appraisal of the way in which the EU regulates hedge funds (HFs) in the Alternative Investment Fund Managers Directive (AIFM Directive) and its proposal to regulate the repo markets from which they obtain much of their leverage. It argues that the EU's scheme is not a radical departure from the pre‐crisis market liberalist approach and that its reliance on discretionary intervention is misplaced because it does not take account of the fundamental uncertainty that characterises financial markets. The article outlines the operations of HFs and explores the extent to which they pose a threat to systemic stability, paying particular attention to the use of leverage by HFs. It explores the background to the AIFM Directive and the post‐crisis international consensus on financial regulation and then evaluates the complex division of responsibility for regulating HFs between the national and supranational authorities. Finally, it discusses how HFs should be regulated. Drawing on the work of Minsky, it argues that a leverage cap would have been more likely to prevent HFs contributing to systemic instability than the scheme adopted. Nor are the proposed rules on mandatory ‘haircuts’ in repo markets or the AIFM Directive's rules on remuneration likely to prevent HFs contributing to systemic instability.     

Developing Codes of Conduct: Regulatory Conversations as Means for Detecting Institutional Change

The introduction of a new corporate governance code in Sweden, modeled after prevailing Anglo-Saxon norms of corporate governance, offers the opportunity to investigate global regulatory convergence. Using the metaphor of regulatory space, this article analyzes the positions of the parties who submitted formal responses to the introduction of "The Swedish Code of Corporate Governance—A Proposal from the Code Group." While the globalization of financial markets might forecast unconditional acceptance of the proposed code by business and financial interests, the analysis of who made comments, and what was said, reveals three categorically distinct groups: Swedish business "insiders" connected to the existing institutional framework who opposed changes that would erode traditional division of functions, including collective responsibility for the actions of company boards; "outsiders" (i.e., foreign investors and more marginal Swedish investors) aligned with Anglo-Saxon internationalization of the markets who would change the system of corporate accountability; and the professions (i.e., auditors), who advocated for their professional interests. Of the three groups, Swedish business insiders were most successful in gaining support for their positions. Although international financial and political interests were key to the introduction of the Code in the first place, the article demonstrates how the dynamics of national (local) culture and power structures influence the transfer of regulatory law across jurisdictions.     

系统重要性金融机构监管的国际法制构建与中国回应

作为金融市场的一类特殊参与主体,系统重要性金融机构(SIFIs)具有负外部性,容易引发系统性风险与巨大政府救助成本。在传统的微观审慎监管体制之下,SIFIs的负外部性得不到充分处置,由此导致金融体系乃至实体经济的稳定受到严重威胁,2008年的全球金融危机充分暴露出传统金融监管法制的重大缺陷。在后危机时代,国际社会正在力图构建新型法制,对SIFIs实施专门监管,以防范金融系统性风险和危机。新型监管法制的构建围绕SIFIs的合理识别、强化监管以及有效处置这三个方面展开。我国应积极参与SIFIs监管的国际法制构建工作,同时积极构建与我国金融业现实情况相符的对SIFIs监管的国内法律制度。     

国际金融软法的效力与发展趋势

在全球治理与公民社会兴起的背景下,国际金融软法的蓬勃发展是一种必然趋势。国际金融软法虽然不具有法律约束力,但在实践中却可能产生某种实际约束效果。运用社会法学派和现实主义学派的方法,可以较好地解释这一现象。国际金融软法的制定主体、调整范围和表现形式具有广泛性和多样性,能够在一定程度上弥补国际金融硬法的不足。国际金融软法的实际约束效果主要通过法律上和事实上的"硬化"来体现。从发展趋势来看,除转化为国际条约、国际习惯和国内法之外,国际金融软法在较长的时期内仍有自己独立的发展空间。国际金融软法的未来发展有赖于进一步提高公众参与度和透明度。     

Architects of the State: International Financial Institutions and the Reconstruction of States in East Asia

For international financial institutions (IFIs), it is a continuing puzzle why the global norms they propagate are enacted either reluctantly or not at all. This article shows that failures of enactment and implementation frequently occur because many IFI‐initiated law reforms go far beyond changing the law; they amount to a restructuring of the state itself and the accompanying redistributions of power. This article demonstrates how state restructuring can occur in a technical area of commercial law by reanalyzing the ways global and transnational designs of corporate bankruptcy regimes fared between 1998 and 2006 in three countries variously affected by the Asian financial crisis: China, Indonesia, and South Korea. State restructuring occurred by (1) shifting the boundary between the market and state, (2) shifting power inside the state, and (3) vesting new powers in the state. The article identifies the recursive dynamics through which the changes unfolded and shows how variations in the efficacy of international architects of the state can be attributed to the interplay of four sets of factors: the coherence of global norms, the relative power of global versus state actors, domestic demand and mobilization for restructuring, and the extent of state restructuring that reforms will induce.     

The Governance of Blockchain Financial Networks

Since the emergence of the virtual currency Bitcoin in 2009, a new, Internet‐based way of recording entitlements and enforcing rights has increasingly captured the interest of businesses and governments. The technology is commonly called ‘blockchain’ and is often associated with a closely related phenomenon, the ‘smart contract’. The market is now exploring ways of using these concepts for financial assets, such as securities, fiat money and derivative contracts. This article develops a conceptual framework for the governance of blockchain‐based networks in financial markets. It constructs a vision of how financial regulation and private law should set the boundaries of this new technology in order to protect market participants and societies at large, while at the same time allowing the necessary room for innovation.     

From a Symbolic Boom to a Marketing Bust: Genesis and Reconstruction of a Field of Legal and Political Expertise at the Crossroads of a Europe Opening to the Atlantic

The short history of environmental institutions and policies in Europe is marked by their radical reorientation. While environmental protection devices were initially conceived in the 1970s by using the classical model of the "watchdog state," they underwent a shift during the 1990s: the ineffectiveness produced by bureaucratic constraints served as a pretext to hasten the disengagement of the state to the benefit of a regulation negotiated on the basis of financial incentives. The management of environmental issues now relies on the construction of an international market of sustainable development (or of a "rights to pollute" market, similar to that which has been established by the Kyoto protocol). The emergence and reconstruction of this field of expertise can be seen as a kind of microcosm of the perpetually unfinished Tower of Babel that is the European construction. One of the merits of this subject matter is to highlight the internal and external dynamics that have favored the success of a neoliberal counterattack.     

Walking the Tightrope: Harmful Acts and the Construction of Crime in the Norwegian Securities Markets

The main topic of this article is the regulation and the construction of insider trading as crime. Trading on inside information is not something new, but the dramatization and the attempt to regulate these acts by penal law are of quite recent date. This article tries to examine the simple question of why there has been such activity in this field the last 20–30 years and the goals of this regulation. The article points out the need for building trust in the financial markets, even if it might be illusory, especially when these markets have been opened for the money of ‘ordinary citizens’. It also stresses the importance of creating a ‘moral map’ in order to establish clearer lines between right and wrong in the rather blurry world of financial markets.     

Institutionalization of a Human Community with a Shared Future and Principles of International Law

The doctrine of building “a human community with a shared future” (HCSF) is a Chinese diplomatic strategy in the new era moving closer to the center of global affairs. It includes enriched ideas about international law and the essential elements of institutionalization. The emergence and development of modern international law have revealed the critical importance of the ideas about international law as guidance for institutions. It is necessary and possible to institutionalize the HCSF by setting its ideas as principles of international law. The principles of international law for the HCSF are those of durable peace, universal security, common prosperity, coexistence of different civilizations, and sustainable development. The new five principles of the HCSF are integrated with the existing general principles of international law and Chinese proposals for the new era, which is not only the development of Chinese-initiated Five Principles of Peaceful Coexistence but also a new contribution to the contemporary international law. It will be the new guidance to advance the profound changes of international relations unseen in a century for the common interest of mankind.     

论后金融危机时代金融监管国际合作的组织机制——全球金融集体安全机制构建思考之一

金融全球化呼唤金融监管国际合作,而金融监管国际合作需要国际金融监管组织。鉴于目前的国际社会结构,国际金融监管组织只能是国家间组织,而非超国家组织。由于现有的国际金融组织都不足以担当金融监管国际合作的历史使命,国际社会需要创建一个全新的国际金融监管组织。这一全新的国际金融监管组织应该具有以下组织形态特征:第一,它应该是一个全球性的、开放性的、专门性的、政府间的金融监管组织;第二,它应该是一个能够凸显国际关系民主化的金融监管组织;第三,它应该是一个具有横向综合监管职能的金融监管组织。     

Counterfeiting as corporate externality: intellectual property crime and global insecurity

Corporate negative externalities occur when corporations place some of the costs of their profit-seeking activity onto society. This paper suggests that the current global problem of intellectual property crime is such an externality, and that it has not been recognised as such because corporations present product counterfeiting and piracy as crimes which reduce their revenue, rather than as predictable side effects of corporate production and merchandising, including branding activity, which have considerable socially deleterious consequences. It is argued that corporate actors are responsible for the socially harmful effects of the global counterfeiting problem in the following respects. Branding, advertising, and other corporate activities drive the market for goods which have a fashion value over and above their use value. While corporations ‘create’ this desire, they cannot prevent it being applied to the desire for fake or replica goods. Outsourcing of corporate production activities to developing countries to take advantage of cheap manufacturing and labour costs presents considerable opportunities to producers in those countries to copy and distribute the goods in an unauthorised way. Serious measures are not taken against product counterfeiters by rights-holding corporations, since market expediency dictates that the costs of counterfeiting are not so adverse to corporations to incentivise them to change their business methods. Counterfeit and pirated goods cause a range of social harms above and beyond the spuriously-costed financial damage corporate rights-holders suggest they suffer - these include the health and safety issues created by some fake goods, and the creation and maintenance of highly profitable organised crime activity in international markets for fake goods.     

Legal Certainty and the Role of the Financial Markets Law Committee

The first 150 words of the full text of this article appear below. Key points

• The role of the Financial Markets Law Committee (‘FMLC’)is to provide specialist assistance to those who must meet thechallenges of reforming, modernizing and applying financiallaw by identifying issues of legal uncertainty that may facethe wholesale financial markets and by working to resolve them,if possible, before they give rise to any material risk.
• Itis the author's view that the FMLC is uniquely positioned toserve rule of law values such as legal certainty and legal stability.
• Thisarticle suggests that, in the light of the challenges facingthe financial markets today, the rapid emergence of new markets,the accelerating rate of financial products ‘innovation’,the impact of recent international and European initiativesto harmonize financial markets law and the prospect of law reforminitiatives not yet even underway, the FMLC has an importantrole to play for the future.

  Much is said and . . . [Full Text of this Article]