Switzerland Steps Up Anti-Money Laundering Controls

by Ulrika Lomas, Tax-News.com, Brussels

26 July 2001

According to media reports from Switzerland, the Swiss parliament has decided to form a new central authority to combat financial crime in the country. The decision arose from concerns raised over just how efficient the system is regarding money laundering controls.

It has been three years since Switzerland implemented its anti-money laundering legislation, and according to the Swissinfo news agency, not one single case headed by the federal authorities has been successfully prosecuted to date. However, cantonal prosecutors acting on their own authority have secured 213 convictions.

So who is to blame? The Money Laundering Control Authority (MLCA) has been dogged by controversy recently with its director, Niklaus Huber handing in his resignation after bemoaning a lack of support from the Swiss finance ministry. His departure did not help to quash rumours, rife at the time, that the MLCA was under-staffed and under-funded.

And the MLCA branch which is the first port of call for the banking industry when reporting suspicious transactions, the Money Laundering Reporting Office (MLRO), has not been free from difficulties either. In the past year, four employees have resigned including senior official, Daniel Thelesklaf, who declared that he had not been awarded the necessary authority to deal effectively with financial criminal activities.

But Judith Voney, Mr Thelesklaf's replacement, told the local press that the office was indeed making headway. She said: 'We are investigating suspicious cases and the fact that we can forward them to the investigating authorities is a success in itself.'

James Nason of the Swiss Bankers Association informed Swissinfo that the MLRO has mastered its brief. 'The Office only sets the ball rolling,' he says, 'then they hand [cases] over to the cantonal authorities.'

Mark Pieth, chairman of the OECD's working group on bribery, has argued that Switzerland's para-banking sector is largely to blame because it is self-regulating and therefore does not experience the same levels of scrutiny as Swiss banks, which come under the responsibility of the Federal Banking Commission.

He commented: 'This self-regulation regime of the para-banking sector has caused a lot of hiccups. 'There is a deficit of para-banks under surveillance and they don’t seem very interested in reporting suspicious cases.' This argument is supported by the MLRO's annual report which found the number of suspicious transactions reported by the para-banking sector - although 10 per cent up on last year - to be well behind those from the banks themselves.

Ultimately, says Pieth, the inconsistency of the system across the cantons are to blame. 'You find quite active law enforcement agencies in Geneva; relatively active ones in Zurich and theoretically active ones in [Italian-speaking] Lugano. In other places, you find some not so active people.'

So parliament has decided to try a different tack by removing the responsibility for prosecuting cases from the cantons and giving it instead to the new central authority which will also be responsible for notifying and investigating cases.

'The prospect of having a centralised unit with professionals drawn together in Bern from all levels of the police and judiciary system is the best chance of doing the best possible job. At the moment it is very much decentralised and left to the efficiency of the local agencies,' expounded Pieth.

The new authority, to be located in Bern, is currently training its staff in Lucerne and it is expected to employ around 450 staff in total.

In addition to the forming of the new body, Judith Voney has confirmed that a new law is due to be enforced next year that will further centralise Switzerland's attempts to effectively tackle money laundering, organised crime and corruption. 'Under the new law, the Federal Police Office will receive the mandate to investigate cases with an international dimension. This will allow experts with specialist know-how to be more efficient in their investigations,' she said.

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