Switzerland unveils money laundering clampdown

The Swiss government has proposed new measures to crack down on money-laundering in order to clear the country of its reputation as a haven to hide ill-gotten wealth.

Karin Keller Sutter, the Finance Minister, announced reforms Wednesday that will increase transparency and close loopholes in law by requiring trusts and corporations to declare their ultimate “beneficial owner”.

The Swiss are the only European nation without a national ownership register.

Critics claim that the existing Swiss regime has been used by criminals and oligarchs from around the globe to hide their assets using Swiss institutions.

Keller-Sutter stated that a robust system for protecting against financial crime was essential to the success and reputation of a secure, forward-looking and internationally significant financial centre. ” money laundering is harmful to the economy and undermines confidence in the financial sector.”

Switzerland is the number one offshore centre in the world, with an estimated $2.4tn worth of foreign assets that its banks hold.

The financial community of the country also plays a large role in setting up trusts and offshore structures and maintaining them in other jurisdictions.

Keller-Sutter acknowledged that Switzerland has a good international reputation for maintaining financial standards, but also admitted there are “gaps”.

In recent months, the international community has put pressure on Switzerland to tighten its financial controls in response to Russia’s invasion of Ukraine.

Bern has been accused of not policing its compliance with EU sanctions against Russia.

The long-standing reputation of Switzerland as a business and leisure destination for the Russian elite continues to affect its standing among Western peers.

In April, G7 ambassadors at Bern criticized the Swiss government for turning a deaf ear to the many “loopholes”, and the role Swiss lawyers played in exploiting these loopholes. They said that this was being done to avoid sanctions.

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

The public will not have access to the new register of beneficial ownership of all corporate entities, trusts and other legal entities set up within the country.

It will also be accessible to accredited lawyers, banks, and government officials who perform due diligence.

Second, Swiss lawyers and accountants will be subject to stricter obligations. They will be required to perform due diligence on their clients, to keep track of these checks and to report any suspected cases of money laundering.

It will be some time before the proposals become law. In Switzerland, the consensus-based system of politics requires a period for consultations with political parties and groups. This includes influential lawyers and banking lobbies. The consultation period will last for three months before the formal legislation is presented to parliament in 2011.

Critics say the final measure may be significantly diluted. In the proposals, it is already recommended that corporate service providers “self-regulate” their compliance with new rules.

Recent high-profile cases have cast a negative light on Swiss financial practices, and undermined Bern’s claims that it polices financial flow within its borders.

This year, a Zurich court found that four senior bankers were guilty of having enabled the laundering money worth tens and millions of dollars. The money was directly related to Russian President Vladimir Putin.