Swiss Financial Sector To Face Renewed Pressure

Jason Gorringe, Tax-news.com, Paris

09 November 2000

As reported this week by Tax-news.com, two of Switzerland's key bodies engaged in snuffing out money laundering have seen a plethora of significant resignations in the last few days. The news has not gone down well with the OECD, which has expressed its concern that Switzerland may not be able to orchestrate its anti-money laudering efforts now.

Both the Swiss Finance Ministry's authority that oversees money laundering controls and the self-regulating body that oversees anti-money laundering efforts for non-banking entities have lost proportionately large numbers of their staff. Mark Pieth, head of the OECD anti-corruption working group, is reported to have said: 'If both pillars of the money-laundering law are falling down at practically the same time, then it can't just be about personal problems. There must be structural questions.'

Mr Peith recognises that Swiss banks have made a concerted effort to crack down on money laundering but warned that Switzerland would come under renewed international pressure unless it could stop the haemorrhage and ensure all financial institutions comply with the rules. He said there was still a problem with the "para-banking" sector, which includes fiduciaries, exchange bureaus and raw material dealers, who regulate themselves rather than being controlled by the state.

Although a supervisory agency has been created to step in when self-regulation fails, Mr Pieth believes it is pretty ineffective. He said: 'Many of these para-bankers have been very hesitant to join the supervisory agency, and they number a few thousand professionals who actually had to realise that they were para-bankers in the first place.'

Mr Pieth believes there are loopholes in implementing the Swiss money laundering law, but that those lax in doing so risk losing their reputations as a result. He said: 'I believe that in the legal profession, it is possible to create a culture of awareness. I think that these people who are resisting have to realise that they have a choice between being state-regulated or being driven out of business.'

The problems faced by the Swiss money laundering authorities are not only of concern to the OECD but to the Swiss government itself. A key committee in the House of Representatives this week expressed its "grave concern" at the way the country’s law on money laundering was being implemented. However, it said it was premature to talk of revising the law introduced in 1998, which requires banks and other financial institutions to inform the Federal Money Laundering Reporting Office of any suspicious transactions.

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