Switzerland announced on Thursday evening that it is freezing any assets belonging to Libyan leader Moammar Gaddafi and his entourage.
The foreign ministry said the decision had come into force immediately.
“To pre-empt any misuse of state funds, the cabinet today decided to block all assets in Switzerland belonging to Moammar Gaddafi and his entourage with immediate effect,” a ministry statement said.
“The sale of the property of these persons – in particular real estate - or disposing of it in any way is forbidden as of now.”
The freezing order is valid for three years, the statement said.
The Libyan foreign ministry on Thursday responded to the move by denying the country had any money in Swiss banks. It threatened legal action against Switzerland for what it said were "unsubstantiated claims".
"We demand ... that Switzerland prove that the brother leader has funds or accounts in its banks or in any other bank in the world," the Libyan foreign ministry said in a statement, adding that the Swiss move to freeze funds demonstrated "the degree of animosity towards Libya and its leader".
During the diplomatic row between Switzerland and Libya which broke out in 2008 over the arrest of one of Gaddafi’s sons in Geneva, billions of francs worth of Libyan deposits were withdrawn from Swiss banks as part of Libyan retaliation.
The Swiss National Bank says that only about SFr 630 million ($680 million) is left from what were once holdings of SFr5.7 billion.
It is unclear what proportion of this might belong to Gaddafi or any of the other people named by the Swiss government.
The list contains 28 names in addition to Gaddafi himself. They include his wife, sons and daughters. Also on the list are other relatives and heads of various national companies.
Earlier this year Switzerland froze the assets of the former president of Tunisia, Zine al-Abedine Ben Ali, and of Egypt, Hosni Mubarak, but in both cases waited until they had been overthrown – even though, in the case of Egypt, the order came into force only 30 minutes after Mubarak's departure from power was announced.
There had already been calls for the immediate freezing of Gaddafi’s money from Swiss non-governmental organisations and from the Social Democrat party.
“Switzerland must take sides with the majority of the population, not with autocratic despots and tyrants,” the Social Democrats wrote in a statement issued earlier on Thursday.
“The law against money laundering is a failure if the assets of potentates can only be blocked once they have been toppled,” the statement said.
The Alliance Sud umbrella group of Swiss development NGOs welcomed the decision to block the funds, saying the government had “for once” acted “with foresight” by acting against a leader still in power.
In its statement explaining its action, the foreign ministry said it was following the situation in Libya closely.
“The people who in recent days have been rebelling against the Tripoli regime in the streets of Libya and demanding their democratic rights, have been risking their lives. The [Swiss] government is very conscious of their courage,” the statement said.
It expressed Switzerland’s condolences to the families of the many people who had been killed in the violent attempts taken to put down the demonstrations.