Switzerland unveils anti-money laundering campaign

Swiss regulator reviews money laundering risks at 30 banks
Switzerland unveils anti-money laundering campaign
Money Laundering

Will Switzerland succeed in shedding its reputation as a haven for illicit gains? The country, which is the world’s number one center for foreign wealth, announced new draft regulations aimed at strengthening its anti-money laundering measures.

The foreign assets held by banks in Switzerland are estimated at $2.4 trillion. Switzerland currently shares banking information with more than 100 countries.

It is the second time in three years that Switzerland has reformed its laws against financial crime.

It has faced global calls for increased transparency surrounding the murky arena of corporate ownership. Funds and corporations often hide the true identity of the end beneficiaries.

The country’s financial community also plays a large role in helping to establish trusts and offshore structures.

Critics say the country’s existing system has been abused by oligarchs and criminals around the world to conceal ownership of assets using Swiss institutions and expertise.

If approved, the new framework will expand the scope of due diligence and reporting obligations for lawyers, accountants and other consultants involved in the establishment of trusts, holding companies or the management of real estate transactions.

In addition, the government has outlined plans to create a central registry documenting the true owners of legal entities, with the aim of combating money laundering through shell companies. This was proposed last October.

At present, Switzerland is the only European country that does not already have such laws.

Read: UAE imposes AED76.9 mn in penalties on 225 companies for money laundering

The new register will not be available to the general public, but will be available to regulators, the government and the police as well as banks and certified lawyers who exercise due diligence for access.

The reform project also indicates that all future real estate transactions will be subject to due diligence checks. Moreover, cash transactions for high-value commodities such as gold and diamonds will fall under anti-money laundering checks for amounts exceeding CHF 15,000 ($17,055.14), a significant drop from the current threshold of CHF100,000.

Swiss Finance Minister Karin Keller-Sutter revealed that her country is cracking down on money laundering.

Keller-Sutter said: “A robust financial crime protection system is essential to the lasting reputation and success of an important, secure and forward-looking financial center internationally. Money laundering harms the economy and jeopardizes confidence in the financial system.”

She said in comments on Wednesday that Switzerland had an international reputation for adhering to financial standards but acknowledged there were “gaps”.

Although the wealthy Alpine nation has moved with the EU in imposing sanctions on Russia, critics have accused Bern, Swiss’s capital city, of not complying enough.

Switzerland’s long history as a favorite business and leisure haven for the Russian elite continues to affect the country’s reputation among its Western peers.

In April, G-7 ambassadors in Bern criticized the Swiss government in a joint letter for turning a blind eye to the many “loopholes” in Swiss law — and the role Swiss lawyers play in exploiting them — that they said were used to facilitate sanctions evasion.

Swiss financial regulator FINMA revealed that it looked into money laundering risks in 30 banks this spring, after identifying shortcomings in the region.

“In particular, there was no proper definition of money laundering risk tolerance, which constitutes the limited framework for strong risk analysis through specific limits, in some cases,” Finma said.

The poor valuation of banks – which were not identified by name – is important because Switzerland ranks first worldwide in wealth management.

In its 2023 Global Wealth Report released in late June, the Boston Consulting Group predicted that Hong Kong is poised to replace Switzerland as a wealth hub by 2025.

For more banking and finance stories, click here.