The world is becoming more connected, opening up endless possibilities when it comes to how and where investors spend or save their money. The global financial crash of 2008 changed the world forever and the deep scars of the crisis are still being felt today a decade on.
The greater global awareness of big business, financial institutions and governing bodies throughout the world has increased the scrutiny on these organisations. The public interest in the scandals make them international news, and the speed at which news spreads concerning those involved has very real personal repercussions for directors and investors alike, however this deterrent isn’t always enough to safeguard against bad practice and sometimes criminal behaviour.
The LuxLeaks scandal of 2014 centred around the complex strategies of many multinational companies with offices in Luxembourg to reduce their tax bills to practically zero. The documents revealed details about how the companies had cut their tax bills by moving profits around different parts of their corporate group, playing national tax systems off against one another. Household names caught up in the saga included Ikea, Pepsi and Fiat. The implication of these leaks are still being felt today, and along with other high profile leaks such as the Panama Papers, helping to shape the future of transparency and governance in large corporations and financial institutions, especially in Luxembourg.
Pierre Gramegna, Luxembourg’s finance minister, says he aims to create an international “level playing field”. “We need more transparency, and everyone has to play along,” he says. “Now the European Union is doing that and we are expecting others to follow.”
The Luxembourg government, keen to ensure that scandals do not hinder the country’s economic potential, have acted quickly to put into place and enforce new regulations aimed at demonstrating and enforcing greater transparency and personal accountability and culpability for organisations operating within, and financial institutions based in the grand duchy.
Luxembourg’s strong ties with the EU, including the European Commission’s president, Jean-Claude Juncker who was Luxembourg’s prime minister at the time the scandal hit and faced intense personal scrutiny at the time, have also helped to shape some the regulations that have been adopted across the European Union.
A large number of these robust regulations come into force in 2018, superseding the outdated directives currently in place. The country’s strong tie in and association with financial institutions, investment funds and insurance companies means that many of the new directives coming to place weigh heavily on these already strictly regulated industries, so much so, you could argue that the potential for governance failings has actually increased with the amount of new regulations they have to keep on top of.
We all know about the introduction of the GDPR, now in less than 100 days at the time of writing, however other directives that have already come into effect as of January this year puts into focus the panic surrounding GDPR.
The Directive on Administrative Cooperation, or DAC5, which focuses on the correct recording of investment transactions and demonstration of customer due diligence, places an increased burden on data capturing and security. The deadline for MiFID II (Markets in Financial Instruments Directive and Regulation) had been known since 2014, however that does not make compliance any easier. The directive places greater requirements for the demonstration of corporate governance, as well as the threat of public sanctions, fines and penalties facing companies and persons falling foul means that 2018 is a compliance minefield before we even reach the May GDPR deadline.
Without the proper structure in place for tracking and monitoring compliance with the new directives, organisations could quickly find themselves in hot water. Technology is the only answer for keeping on top of your corporate governance requirements. Working across a myriad of different systems and platforms to compile your reports has not been advisable for a few years now, but we are reaching the time when continuing to operate with such disparate systems now has severe personal implications for those responsible for compliance.
Governance software can help reduce the burden and personal responsibility for compliance. eShare’s suite of governance tools are trusted by some of the most diligent financial houses and builds transparency and accountability into the existing systems of documentation and meetings. While utilising digital tools that make it easier to find the information required at the right time, the app is also so simple to use, directors will be up and running in a matter of minutes. At a time when compliance and transparency can cause growth paralysis, having an intuitive yet robust technology framework to fall back on is vital for avoiding this.
Whether you’re looking for an on-premise or cloud based solution, eShare’s tools are backed by ISO27001 security certification, keeping your business critical information safe against a growing list of security risks is a headache you no longer need to have.
For more information about our solutions and to schedule a free demonstration of our governance management suite, please contact Daniel.Tin@eShare.net