Clearstream Banking S.A. (CB) is the clearing division based in Luxembourg, of Deutsche Börse.

It was created in January 2000 through the merger of Cedel International and Deutsche Börse Clearing, part of the Deutsche Börse Group, which owns the Frankfurt Stock Exchange. Cedel, established in 1971, specialized in clearance and settlement. In 1996 it obtained a bank license. In July 2002 Deutsche Börse purchased the remaining 50% of Clearstream International for €1.6 billion. Deutsche Börse's strategy is to be a vertical securities silo, providing facilities for the front and back ends of securities trading. By 2004 Clearstream contributed €114 million to Deutsche Börse's total Earnings Before Interest and Taxes (EBIT) of €452.6 million. It handled 50 million transactions, and was custodian of securities worth € 7,593 trillion.

In Révélation$ (2001), by investigative reporter Denis Robert and ex-Clearstream banker Ernest Backes, Clearstream was accused of being an international platform for money laundering and tax evasion via an illegal system of secret accounts (the "Clearstream Affair").

In Spring 2004, a "Second Clearstream Affair" began, which attracted more attention in 2006. Peripheral to the primary Clearstream Affair, it accused several French political figures, industrial leaders, and members of the secret services of maintaining secret accounts at Clearstream, which allegedly were used to transfer kickbacks in a France–Taiwan frigates scandal.

Accusations

In 2001, investigative reporter Denis Robert and Ernest Backes, an executive at Cedel until May 1983, published a book, Revelation$^[1] in which they alleged Clearstream played a major part in the underground economy, was a main platform for money laundering for hundreds of banks, and "operated hundreds of confidential accounts for banks so they could move money undetected," according to Business Week.^[2]

Backes and Le Figaro were sued by Clearstream and found guilty of libel on March 29, 2004 and again in 2006 and 2008. Cases have been appealed

After the initiation of an investigation in Luxembourg, on suspicion of money laundering, tax evasion, and other fraud, Clearstream's CEO, André Lussi, resigned (See below). This enabled Deutsche Börse to purchase the remaining 50% of Clearstream International in July 2002. According to some, such as Business Week, Lussi had opposed such a takeover.

A2006.^[3]

Clearing

Clearstream often has been described as a bank for banks, as it practices what is called settlement for eurobonds mostly'. Basically, its function is to ensure that DVP transactions on which client banks have agreed are processed accordingly.

So a bank can just order a transaction between its own account and the other bank's account, in lieu of less secure methods such as carrying a case full of currency or securities around on the street; the bank merely transmits an order to Clearstream to credit/debit one of its own accounts and the other bank's account(s). This general system is in use between regular companies, governments, and banks around the world.

The purpose of Clearstream is to facilitate money movements around the world, particularly by handling the resolution of sales of European stocks and bonds, in which market Clearstream is a major player, with an estimated 40% market share until May 2004 - together with its competitor Euroclear. The two firms settle 70% of European transactions.^[4] Furthermore, in January 2006, Clearstream was the 18th largest employer in Luxembourg^[5]

Clearstream does not hold a monopoly in this market: Euroclear, owned by the market, and custodian banks are competitors.

Euroclear was created by JP Morgan in 1968 in Brussels (Belgium). By the end of 2000, JP Morgan had extricated itself from Euroclear, but JP Morgan still is one of the 120 international banks which own shares in Euroclear. In 2000, Euroclear processed 145 million transactions, dealing with a total of 100,000 billion euros.^[6]

Eurobonds

Euroclear and then Cedel (now Clearstream) were started in the 70s to manage safe and reliable transfers of "[bonds denominated in eurodollars ie eurobonds Cedel and Euroclear later expanded into handling transfers of stock titles and other financial instruments.

Clearstream's dominant position

On June 2, 2004, the European Commission found that "Clearstream Banking AG and its parent company Clearstream International SA (“Clearstream”) infringed competition rules by refusing to supply cross-border securities clearing and settlement services, and by applying discriminatory prices. Clearstream has appealed.

The "Clearstream Affair"

In 2001, co-authors Denis Robert and former Cedel employee until 1983 Ernest Backes wrote a book called Révélation$, which was followed by Robert's La Boîte Noire, describing Clearstream as a huge money laundering and tax evasion machine, used by major banks, shell companies, and organized crime all over the world. An investigation was conducted by the Luxembourg justice and established that there was no substance to any of these accusations and thus decided on a "non lieu". The authors were sentenced for libel four times by the French court.

See also

• Argentine debt restructuring
• ATTAC
• Banco Ambrosiano scandal
• Kremlingate
• Underground economy

References

Notes

Bibliography

• jugement du TGI de Paris des 29 mars 2004 et décembre 2006

jugement du TGI de Bordeaux juin 2008

Denis Robert, Ernest Backes: The silence of the money. The Clearstream scandal. (2002, ISBN 3-85842-546-X )

• Denis Robert, Ernest Backes: Révélation$ (Edition des Arènes, 2001, ISBN 2-912485-28-2)
• Denis Robert, Ernest Backes: Das Schweigen des Geldes. Der Clearstream-Skandal, Pendo Verlag Zurich (2002, ISBN 3-85842-546-X)
• Denis Robert, Ernest Backes: Revelaçoes sobre o mundo financeiro, Editorial Inquérito (Portugal)
• Denis Robert, Ernest Backes: Revelation$ (Japanese ed. Tokuma Shoten Co, Tokyo)
• Denis Robert, La Boîte noire (Editions des arènes, ISBN 2-912485-38-X )
• David Loader, Clearing, Settlement and Custody (operation management Series (Securities of institutes) (2002, ISBN 0-7506-5484-8 )
• David M. Weiss, Global Securities processing: The Markets, The Products (1997, ISBN 0-13-323965-9)
• Lucy Komisar, Explosive Revelation$
• Official March 2000 French Parliamentary Report on the obstacles on the control and repression of financial criminal activity and of money-laundering in Europe by French MPs Vincent Peillon and Arnaud Montebourg, third section on "Luxembourg's political dependency toward the financial sector: the Clearstream affair" (pp.83-111 on PDF version)

External links